Exploring the role Delaware plays as a domestic tax haven
AbstractWe examine whether Delaware is a domestic tax haven. We find that taxes play an economically important role in determining whether U.S. firms locate subsidiaries in Delaware and that a Delaware-based state tax avoidance strategy lowers state effective tax rates by between 0.7 and 1.1 percentage points, on average. The tax savings represent a 15–24% decrease in the state income tax burden and translate to an increase in net income of 1.04–1.47%. However, we find that the tax benefits of Delaware tax strategies are diminishing over time in response to initiatives by state governments to limit multistate tax avoidance.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 108 (2013)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/505576
Delaware; Tax haven; Corporate governance; Corporate tax avoidance;
Find related papers by JEL classification:
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
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