International corporate taxation and US multinationals' behaviour: an integrated approach
AbstractUsing data from the International Revenue Service, this paper explores the effects of corporate taxation on U.S. capital invested abroad and on tax planning practices (dividend payments, income shifting, and passive investment). The econometric analysis first indicates that investment is strongly influenced by average tax rates, with a magnified impact for particularly low-tax rates implying that the attractiveness of low-tax countries is not weakened by anti-deferral rules and cross-crediting limitations. Further explorations suggest that firms report higher profit and are less likely to repatriate dividends when they are located in low-tax jurisdictions. Firms also report higher Subpart F income in countries in which they shift their profit, suggesting that cross-crediting provides an incentive to shift passive income in low-tax countries and that passive investment can be an alternative strategy to minimize taxes when active investment opportunities are lacking. Finally, the paper estimates the role of effective transfer pricing regulation on income shifting activities using the quality of host countries' law enforcement. It appears that low degrees of law enforcement are associated with higher income-shifting.
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Bibliographic InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2009_03.
Date of creation: Aug 2008
Date of revision:
Uncertainty; Multi-Prior Beliefs; Suspension Schemes; Panic-Driven Bank Runs.;
Other versions of this item:
- Céline Azémar, 2010. "International corporate taxation and U.S. multinationals' behaviour: an integrated approach," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 232-253, February.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-02-07 (Accounting & Auditing)
- NEP-ALL-2009-02-07 (All new papers)
- NEP-REG-2009-02-07 (Regulation)
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