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Multinational firms and tax havens

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  • Schnitzer, Monika
  • Hines, James
  • Gumpert, Anna

Abstract

Multinational firms with operations in high-tax countries can benefit the most from reallocating taxable income to tax havens, though this is sufficiently diffcult and costly that only 20.4 percent of German multinational firms have any tax haven affiliates. Among German manufacturing firms, a one percentage point higher foreign tax rate is associated with a 2.3 percent greater likelihood of owning a tax haven affiliate. This is consistent with tax avoidance incentives, and contrasts with earlier evidence for U.S. firms. The relationship is less strong for firms in service industries, possibly reflecting the difficulty of reallocating taxable service income.

Suggested Citation

  • Schnitzer, Monika & Hines, James & Gumpert, Anna, 2016. "Multinational firms and tax havens," CEPR Discussion Papers 11495, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11495
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    References listed on IDEAS

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    1. Martin Ruf & Alfons J. Weichenrieder, 2012. "The taxation of passive foreign investment: lessons from German experience," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1504-1528, November.
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    More about this item

    Keywords

    Multinational firms; Tax havens;

    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

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