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An Analysis of the Relative U.S. Tax Burden of U.S. Corporations Having Substantial Foreign Ownership

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  • Kinney, Michael
  • Lawrence, Janice

Abstract

We compare the tax-paying behavior of U.S. firms substantially influenced by foreign-domiciled firms with other U.S. firms. Because public information is lacking on U.S. firms wholly-owned by foreign investors, we concentrate on publicly held firms with "significant," but not 100 percent, foreign ownership. Public financial statements are analyzed rather than Internal Revenue Service data. We find firms with significant foreign ownership pay less tax than other U.S. firms, but find no support for the hypothesis that the reduced tax burden is attributable to income manipulation. Our evidence suggests that foreign investors select U.S. targets that are (or become) less profitable than their industry counterparts.

Suggested Citation

  • Kinney, Michael & Lawrence, Janice, 2000. "An Analysis of the Relative U.S. Tax Burden of U.S. Corporations Having Substantial Foreign Ownership," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(1), pages 9-22, March.
    • Handle: RePEc:ntj:journl:v:53:y:2000:i:1:p:9-22
    DOI: 10.17310/ntj.2000.1.01
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    1. Alberto Giovannini & R. Glenn Hubbard & Joel Slemrod, 1993. "Studies in International Taxation," NBER Books, National Bureau of Economic Research, Inc, number giov93-1, July.
    2. Giovannini, Alberto & Hubbard, R. Glenn & Slemrod, Joel (ed.), 1993. "Studies in International Taxation," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226297019, November.
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    1. Huizinga, Harry & Nicodeme, Gaetan, 2006. "Foreign ownership and corporate income taxation: An empirical evaluation," European Economic Review, Elsevier, vol. 50(5), pages 1223-1244, July.
    2. Gaëtan Nicodème, 2002. "Sector and size effects on effective corporate taxation," European Economy - Economic Papers 2008 - 2015 175, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Salihu, Ibrahim Aramide & Annuar, Hairul Azlan & Sheikh Obid, Siti Normala, 2015. "Foreign investors' interests and corporate tax avoidance: Evidence from an emerging economy," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(2), pages 138-147.
    4. James Kelly & Robert Graziani, 2004. "International trends in company tax rates — implications for Australia’s company income tax," Economic Roundup, The Treasury, Australian Government, issue 3, pages 23-47, November.
    5. Bakke, Julia Tropina & Hopland, Arnt Ove & Møen, Jarle, 2019. "Profit shifting and the effect of stricter transfer pricing regulation on tax revenue," Discussion Papers 2019/11, Norwegian School of Economics, Department of Business and Management Science.
    6. Athiphat Muthitacharoen, 2020. "Assessing Tax Burden Differential Between Foreign Multinationals and Local Firms: Implications for FDI Tax Incentives," PIER Discussion Papers 127, Puey Ungphakorn Institute for Economic Research.

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