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Tax Policy and the Activities of Multinational Corporations

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James R. Hines, Jr.

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Abstract

This paper reviews quantitative studies of the impact of international tax rules on the financial and real behavior of multinational firms. The evidence, much of it recent, indicates that taxation significantly influences foreign direct investment, corporate borrowing, transfer pricing, dividend and royalty payments, R&D activity, exports, bribe payments, and location choices. While taxes appear to influence a wide range of activity, the literature does not offer many subtle tests designed to distinguish different theories of the effects of taxation on multinational firms. The paper evaluates the reliability of existing evidence and its implications for the design of international tax policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5589.

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Date of creation: May 1996
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Handle: RePEc:nbr:nberwo:5589

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Find related papers by JEL classification:
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hans-Werner Sinn, 1990. "Taxation and the Birth of Foreign Subsidiaries," NBER Working Papers 3519, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Michael J. Boskin & William G. Gale, 1988. "New Results on the Effects of Tax Policy on the International Location of Investment," NBER Working Papers 1862, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Swenson, Deborah L., 1994. "The impact of U.S. tax reform on foreign direct investment in the United States," Journal of Public Economics, Elsevier, vol. 54(2), pages 243-266, June. [Downloadable!] (restricted)
  4. Robert E. Lipsey, 1995. "Outward Direct Investment and the U.S. Economy," NBER Working Papers 4691, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Rosanne Altshuler & T. Scott Newlon, 1991. "The Effects of U.S. Tax Policy on the Income Repatriation Patterns of U.S. Multinational Corporations," NBER Working Papers 3925, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
  7. James R. Hines, Jr., 1994. "No Place Like Home: Tax Incentives and the Location of R&D by American Multinationals," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 65-104 National Bureau of Economic Research, Inc. [Downloadable!]
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  8. Joel B. Slemrod, 1990. "Tax Effects on Foreign Direct Investment in the United States: Evidence from a Cross-Country Comparison," NBER Chapters, in: Taxation in the Global Economy, pages 79-122 National Bureau of Economic Research, Inc. [Downloadable!]
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  9. Jenkins, Glenn P & Wright, Brian D, 1975. "Taxation of Income of Multinational Corporations: The Case of the United States Petroleum Industry," The Review of Economics and Statistics, MIT Press, vol. 57(1), pages 1-11, February. [Downloadable!] (restricted)
  10. Lall, Sanjaya, 1973. "Transfer-Pricing by Multinational Manufacturing Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 35(3), pages 173-95, August.
  11. Roger H. Gordon & Joosung Jun & Joel Slemrod, 1993. "Taxes and the Form of Ownership of Foreign Corporate Equity," NBER Chapters, in: Studies in International Taxation, pages 13-46 National Bureau of Economic Research, Inc. [Downloadable!]
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  12. David G. Hartman, 1981. "Domestic Tax Policy and Foreign Investment: Some Evidence," NBER Working Papers 0784, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Jason Cummins & Trevor Harris & Kevin Hassett, 1995. "Accounting Standards, Information Flow, and Firm Investment Behavior," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 181-224 National Bureau of Economic Research, Inc. [Downloadable!]
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  14. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November. [Downloadable!] (restricted)
  15. Hines, James R, Jr, 1996. " Dividends and Profits: Some Unsubtle Foreign Influences," Journal of Finance, American Finance Association, vol. 51(2), pages 661-89, June. [Downloadable!] (restricted)
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  16. Kopits, George F, 1976. "Intra-firm Royalties Crossing Frontiers and Transfer-Pricing Behaviour," Economic Journal, Royal Economic Society, vol. 86(344), pages 791-805, December. [Downloadable!] (restricted)
  17. James R. Hines Jr., 1994. "Credit and Deferral as International Investment Incentives," NBER Working Papers 4191, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Michael Devereux & Harold Freeman, 1995. "The impact of tax on foreign direct investment: Empirical evidence and the implications for tax integration schemes," International Tax and Public Finance, Springer, vol. 2(1), pages 85-106, February. [Downloadable!] (restricted)
  19. Andrew B. Lyon & Gerald Silverstein, 1994. "The Alternative Minimum Tax and the Behavior of Multinational Corporations," NBER Working Papers 4783, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Rosanne Altshuler & Jack Mintz, 1994. "U.S. Interest Allocation Rules: Effects and Policy," NBER Working Papers 4712, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  21. Roger H. Gordon & Jeffrey K. Mackie-Mason, . "Why is There Corporate Taxation in a Small Open Economy? The Role of Transfer Pricing and Income Shifting," EPRU Working Paper Series 93-06, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  22. James R. Hines, Jr. & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers 3477, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Hartman, David G., 1985. "Tax policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 26(1), pages 107-121, February. [Downloadable!] (restricted)
  24. Mintz, Jack M. & Tsiopoulos, Thomas, 1994. "The effectiveness of corporate tax incentives for foreign investment in the presence of tax crediting," Journal of Public Economics, Elsevier, vol. 55(2), pages 233-255, October. [Downloadable!] (restricted)
  25. Alan J. Auerbach & Kevin Hassett, 1991. "Taxation and Foreign Direct Investment in the United States: A Reconsideration of the Evidence," NBER Working Papers 3895, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Robert E. Lipsey & Guy V.G. Stevens, 1992. "Interactions between Domestic and Foreign Investment," NBER Working Papers 2714, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  27. Martin S. Feldstein, 1995. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 43-66 National Bureau of Economic Research, Inc. [Downloadable!]
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  28. Rosanne Altshuler & T. Scott Newlon & William Randolph, 1996. "Do Repatriation Taxes Matter? Evidence from the Tax Returns of U.S. Multinationals," Departmental Working Papers 199405, Rutgers University, Department of Economics.
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  29. Marsha Blumenthal & Joel Slemrod, 1995. "The compliance cost of taxing foreign-source income: Its magnitude, determinants, and policy implications," International Tax and Public Finance, Springer, vol. 2(1), pages 37-53, February. [Downloadable!] (restricted)
  30. Julie Collins & Douglas Shackelford, 1995. "Corporate domicile and average effective tax rates: The cases of Canada, Japan, the United Kingdom, and the United States," International Tax and Public Finance, Springer, vol. 2(1), pages 55-83, February. [Downloadable!] (restricted)
  31. Harry Grubert & Joel Slemrod, 1994. "The Effect of Taxes on Investment and Income Shifting to Puerto Rico," NBER Working Papers 4869, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  32. G. Peter Wilson & R. Glen Hubbard & Joel Slemrod, 1993. "The Role of Taxes in Location and Sourcing Decisions," NBER Chapters, in: Studies in International Taxation, pages 195-234 National Bureau of Economic Research, Inc. [Downloadable!]
  33. Daniel J. Frisch & David G. Hartman, 1983. "Taxation and the Location of U.S. Investment Abroad," NBER Working Papers 1241, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  34. Harry Grubert & Timothy Goodspeed & Deborah L. Swenson, 1993. "Explaining the Low Taxable Income of Foreign-Controlled Companies in the United States," NBER Chapters, in: Studies in International Taxation, pages 237-276 National Bureau of Economic Research, Inc. [Downloadable!]
  35. Bond, Eric W, 1981. "Tax Holidays and Industry Behavior," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 88-95, February. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eric J. Bartelsman & Roel M. W. J. Beetsma, 2000. "Why Pay More? Corporate Tax Avoidance through Transfer Pricing in OECD Countries," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Kostas Axarloglou & Frank G. Meanor, Jr., 2006. "Taxation and Ownership Structure in Supplying Foreign Markets," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 685-698, Fall. [Downloadable!]
  3. J. Kapler, 2000. "Measuring the Economic Rate of Return on Assets," Review of Industrial Organization, Springer, vol. 17(4), pages 457-463, December. [Downloadable!] (restricted)
  4. James R. Hines, Jr., 1997. "Taxed Avoidance: American Participation in Unsanctioned International Boycotts," NBER Working Papers 6116, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Roberta De Santis & Maria Cristina Mercuri & Claudio Vicarelli, 2001. "Taxes and Location of Foreign Direct Investments: an Empirical Analysys for the European Union Countries," ISAE Working Papers 24, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
  6. Jacob Funk Kirkegaard, 2005. "Outsourcing and Offshoring: Pushing the European Model Over the Hill, Rather Than Off the Cliff!," Peterson Institute Working Paper Series WP05-1, Peterson Institute for International Economics. [Downloadable!]
  7. Mihir A. Desai & James R. Hines, Jr., 1996. ""Basket" Cases: International Joint Ventures After the Tax Reform Act of 1986," NBER Working Papers 5755, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Ahmed, S., 2004. "Modelling corporate tax liabilities using company accounts: a new framework," Cambridge Working Papers in Economics 0412, Faculty of Economics, University of Cambridge. [Downloadable!]
  9. Mihir A. Desai & James R. Hines Jr., 1997. "Excess Capital Flows and the Burden of Inflation in Open Economies," NBER Working Papers 6064, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Signe Krogstrup, 2004. "Are Corporate Tax Burdens Racing to the Bottom in the European Union?," EPRU Working Paper Series 04-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  11. Frances Ruane & Padraig Moore, 2005. "Taxation and the Financial Structure of Foreign Direct Investment," The Institute for International Integration Studies Discussion Paper Series iiisdp88, IIIS. [Downloadable!]
  12. Nicodeme, Gaetan, 2002. "Sector and size effects on effective corporate taxation," MPRA Paper 15781, University Library of Munich, Germany. [Downloadable!]
  13. G. Schwartz, 2000. "Non-Enforceability of Trade Treaties and the Most-Favored Nation Clause: A Game Theoretic Analysis of Investment Distortions," Princeton Economic Theory Papers 00s17, Economics Department, Princeton University.
  14. Peter Mullins, 2006. "Moving to Territoriality? Implications for the United States and the Rest of the World," IMF Working Papers 06/161, International Monetary Fund. [Downloadable!]
  15. Yuquing Xing & Charles Kolstad, 2002. "Do Lax Environmental Regulations Attract Foreign Investment?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(1), pages 1-22, January. [Downloadable!] (restricted)
    Other versions:
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