Income shifting has drawn the attention of politicians, the media, and taxing authorities worldwide. In this study, we seek to add to our limited understanding of this distinct tax planning strategy by investigating whether the quality of a firm's internal information environment facilitates its tax-motivated income shifting activities. Although prior literature has found a positive association between internal information quality (IIQ) and general tax avoidance, measured as the effective tax rate, it is unclear whether internal information quality will lead to greater tax-motivated income shifting (Gallemore and Labro 2015). Higher IIQ provides managers with the information necessary to make better and more informed decisions (Cheng et al. 2015), suggesting that IIQ potentially improves information transfer across MNCs' operational units to identify and execute opportunities for tax-motivated income shifting. However, penalties associated with income shifting may cause firms to focus on compliance with regulations rather than maximizing the amount of income...
