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Corporate Taxation and International Financial Integration: U.S. evidence from a consolidated perspective

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  • Agustín Bénétrix
  • André Sanchez

Abstract

We document a robust relation between corporate tax differentials and US international financial integration (IFI). While this is the case for traditional IFI based on cross-border positions, the positive link also emerges for its larger consolidated-by-nationality version. The gap between these IFI measures, the key outcome variable in our analysis, exhibits a strong positive correlation with tax differentials too. This is in part due to consolidated assets of multinational enterprises being more strongly correlated with tax differentials than their cross-border counterpart. We interpret this as indirect evidence of US multinationals taking advantage of tax differentials in ways that go beyond what is captured by traditional Balance of Payments procedures.JEL: F36, F21, F23, H87.

Suggested Citation

  • Agustín Bénétrix & André Sanchez, 2023. "Corporate Taxation and International Financial Integration: U.S. evidence from a consolidated perspective," Oxford Open Economics, Oxford University Press, vol. 2, pages 47-66.
    • Handle: RePEc:oup:ooecxx:v:2:y:2023:i::p:47-66.
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    References listed on IDEAS

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    1. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
    2. Hebous, Shafik & Johannesen, Niels, 2021. "At your service! The role of tax havens in international trade with services," European Economic Review, Elsevier, vol. 135(C).
    3. Sanchez Pacheco, André, 2022. "A consolidated-by-nationality approach to Irish foreign exposure," International Economics, Elsevier, vol. 170(C), pages 235-247.
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    More about this item

    Keywords

    international financial integration; financial globalization; multinational enterprises; corporate taxation;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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