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The Differential Effects of Bilateral Tax Treaties

In: Foreign Direct Investment

Author

Listed:
  • Bruce A. Blonigen
  • Lindsay Oldenski
  • Nicholas Sly

Abstract

Bilateral tax treaties (BTTs) are intended to promote foreign direct investment through double-taxation relief. Using BEA firm-level data, we find a positive effect of BTTs on FDI, which is larger for firms that use differentiated inputs. BTTs allow multinational firms to request assistance from treaty partners’ governments if they have a grievance about how tax liabilities are determined. These provisions disproportionately benefit firms that use inputs for which an arm’s-length price is difficult to observe, since allocation of earnings across countries is more complex. We find differential BTT effects for both sales by existing affiliates and entry of new affiliates.

Suggested Citation

  • Bruce A. Blonigen & Lindsay Oldenski & Nicholas Sly, 2019. "The Differential Effects of Bilateral Tax Treaties," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 7, pages 235-263, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789813277014_0007
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    More about this item

    Keywords

    Foreign Direct Investment; Multinational Enterprises; Mergers and Acquisitions; Greenfield; Trade Policy; Taxation; Spillovers; Offshoring; Wage Inequality; Firm-Specific Assets; Antidumping; Tariff-jumping; Industrial Organization; Ownership-Location-Internalization Theory;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F6 - International Economics - - Economic Impacts of Globalization

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