We develop a framework to study the macroeconomic implications of taxing multinational enterprises (MNEs) that operate subsidiaries in multiple tax jurisdictions. The proposed environment features several regions that differ in size, productivity, openness to trade and FDI, and corporate tax rates. Firms in each region choose where to operate foreign subsidiaries and invest in non-rival technology capital. Foreign subsidiaries pay licensing fees to use this technology capital according to the arm’s length principle. MNEs can shift their profits to the lowest-tax region by selling the rights to this technology to their affiliates in this region at a markdown from the technology’s market price. We first prove analytically that profit shifting increases intangible investment, leading to higher profits and output at the MNE level. We then calibrate our model so that it reproduces salient facts about production, trade, FDI, and, most importantly, international profit-shifting. We use our calibrated model to evaluate the consequences of two proposals by the OECD and G20 governments aimed at reducing profit-shifting by MNEs. We find a 15% minimum global corporate income tax; and a plan to allocate a portion of the rights to tax an MNE’s profits to the countries where its sales occur. We show that these proposals would indeed reallocate profits from tax havens to higher-tax countries where lost profits would fall by one-half to two-thirds. However, they would also have adverse macroeconomic effects, that is investment in technology capital, output, and welfare would fall in high-tax regions. This highlights a key tension for policymakers, which is profit shifting erodes high-tax countries’ tax bases, but also boosts economic activity, and thus policies that reduce profit shifting have adverse macroeconomic side effects.