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Cross-country differences in corporate income tax (CIT) rates create incentives for multinational enterprises (MNEs) to manipulate the prices that they use for intracompany transactions (known as transfer prices) to shift profits to countries with more favorable tax treatments. Such behavior reduces the aggregate tax burden of an MNE thus increasing its worldwide after-tax profits, which presumably increases stockholder value. However, this behavior also erodes the CIT bases of countries, like the United States and other OECD countries, with relatively high CIT rates. To mitigate such behavior, governments adopt and enforce anti-tax avoidance rules. In this paper, I seek to gauge the effect on profit shifting of CIT-rate differentials among countries. I improve upon the current practice to estimating this elasticity by constructing a measure of the stringency with which countries enforce their anti-tax avoidance rules and take into account their incentive to enforce them. I report evidence showing that the failure to account for the enforcement of anti-tax avoidance rules and the incentive to enforce them results not only in biased estimates of the semielasticity of reported profits with respect to CIT-rate but also results in a misspecified empirical model. I estimate the empirical model of reported profits using detailed annual data on more than 40,000 affiliates located in 28 countries during the period from 2008 to 2014. To illustrate the practical consequences for tax policy analysis of correctly specifying the empirical model, I conduct a policy simulation in which the United States reduces its CIT rate by 20 percent.