The provision of public services and infrastructure is an important factor for economic growth. But in many developing countries, the quantity and quality of public services are low. One explanation for this is that these countries find it much more difficult to raise tax revenue than developed countries. This research project will focus on multinational firms as an important potential source of tax revenue. Multinationals tend to be more profitable than domestic firms, implying that they should also pay higher taxes. But multinational corporations can also shift income to low-tax jurisdictions more easily using a variety of devices such as transfer pricing or excessive levels of debt. Anecdotal evidence suggests that developing countries lose a substantial fraction of their tax base through this ‘income-shifting’, but empirical studies of the topic are rare. This research project will investigate the determinants of taxes paid by multinational corporations in developing countries. This will involve estimating the extent to which such firms shift profits out of developing countries, and exploring the determinants of these profit-shifting activities. The researchers plan to address these issues using recently available accounting data for a large number of corporations, both multinational and domestic, in a range of developing countries. Income-shifting activities may be motivated by the avoidance of corporate taxation. Existing studies suggest that multinational firms operating in industrialised countries avoid taxes by shifting income to low-tax jurisdictions. It seems likely that this problem is more severe in developing countries as many of these countries lack sophisticated policies directed at stopping tax avoidance, such as controlled foreign corporation rules and transfer pricing regulations. In developing economies, profit-shifting activities could also be driven by the desire to hedge the company against political risks such as expropriation, and to protect the company from government or state failure. This research project will investigate the relative importance of these factors in driving income out of developing countries. Understanding why income-shifting occurs is vital for the design of policies that can improve tax revenue mobilisation in developing countries, maintaining the ability to attract multinational investment.