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The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata

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Author Info
Ronald B. Davies
Pehr-Johan Norbäck
Ayça Tekin-Koru

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Abstract

This paper uses affiliate-level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behaviour of multinationals along some dimensions but not along others. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9701.2009.01158.x
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Publisher Info
Article provided by Blackwell Publishing in its journal World Economy.

Volume (Year): 32 (2009)
Issue (Month): 1 (01)
Pages: 77-110
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Handle: RePEc:bla:worlde:v:32:y:2009:i:1:p:77-110

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  13. Rodolphe Desbordes & Vincent Vicard, 2007. "Foreign Direct Investment and Bilateral Investment Treaties an International Political Perspective," Documents de travail du Centre d'Economie de la Sorbonne bla07045, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne. [Downloadable!]
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  19. Gordon, Roger H. & Hines, James Jr, 2002. "International taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 28, pages 1935-1995 Elsevier. [Downloadable!] (restricted)
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  20. di Giovanni, Julian, 2005. "What drives capital flows? The case of cross-border M&A activity and financial deepening," Journal of International Economics, Elsevier, vol. 65(1), pages 127-149, January. [Downloadable!] (restricted)
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