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

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Author Info
Davies, Ronald
Norback, Pehr-Johan
Tekin-Koru, Ayca

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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 behavior of multinationals along some dimensions but not along others.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6031.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:6031

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Related research
Keywords: Tax Treaties Multinational Firms Foreign Direct Investment

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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    Other versions:
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    Other versions:
  6. James R. Hines Jr., 1994. "Credit and Deferral as International Investment Incentives," NBER Working Papers 4191, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Daniel Millimet & Abdullah Kumas, 2007. "Reassessing the Effects of Bilateral Tax Treaties on US FDI Activity," Departmental Working Papers 0704, Southern Methodist University, Department of Economics. [Downloadable!]
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  11. 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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  12. Ronald B. Davies, 2004. "Tax Treaties and Foreign Direct Investment: Potential versus Performance," International Tax and Public Finance, Springer, vol. 11(6), pages 775-802, November. [Downloadable!]
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    Other versions:
  15. Hines, James Jr., 1994. "Credit and deferral as international investment incentives," Journal of Public Economics, Elsevier, vol. 55(2), pages 323-347, October. [Downloadable!] (restricted)
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  18. Roger H. Gordon & James R. Hines Jr., 2002. "International Taxation," NBER Working Papers 8854, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • 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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