Bachelor Thesis from the year 2016 in the subject Economics - Foreign Trade Theory, Trade Policy, grade: 1,0, University of Tubingen, language: English, abstract: This paper aims at estimating the magnitude of such tax avoidance strategies by the means of international profit shifting. While income shifting of multinational firms is a hotly debated issue among policymakers, this study indeed finds empirical evidence that multinationals respond to international tax differences. On average, it finds a semi-elasticity of -1.25 of firm profits with respect to a country's corporate tax rate. In recent years, globalization and increasing mobility have brought nations closer together but have also encouraged them to compete internationally over tax bases as source of government revenue. Both innovations in financial instruments and the free flow of capital across borders have facilitated tax avoidance measures of multinational operations.