The use of services transactions among firms of the same group is often regarded as a strategy employed by multinationals worldwide to reduce their tax burden. Under this assumption, firms import services provided by firms of the same group located in tax havens to inflate their costs in higher-tax countries, thereby reducing profits recorded there. Conversely, these transactions increase profits recorded in tax havens, where tax rates tend to be very low or even zero.

In Portugal, the percentage of multinational groups that import services from firms of the same group located in tax havens is relatively low. A model that assesses this propensity to import, while controlling for usual determinants of trade between countries, indicates that Portuguese groups do not systematically import more from tax havens than from other countries. On the contrary, they even tend to avoid importing services from firms located in tax havens that are directly targeted by Portuguese anti-tax planning policies.

For more details, see Garcia (2022), “Multinationals and services imports from havens: when policies stand in the way of tax planning”, Banco de Portugal, Working Paper 14.

Prepared by Joana Garcia. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or Eurosystem.

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