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

  • Davies, Ronald B.

    ()

    (University of Oregon)

  • Norbäck, Pehr-Johan

    ()

    (Research Institute of Industrial Economics (IFN))

  • Tekin-Koru, Ayça

    ()

    (Oregon State University)

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 Research Institute of Industrial Economics in its series Working Paper Series with number 833.

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Length: 45 pages
Date of creation: 19 May 2010
Date of revision:
Handle: RePEc:hhs:iuiwop:0833
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  1. di Giovanni, Julian, 2002. "What Drives Capital Flows? The Case of Cross-Border M&A Activity and Financial Deepening," Center for International and Development Economics Research, Working Paper Series qt7nq6d7wp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
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  9. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
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  12. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
  13. Kelly Edmiston & Shannon Mudd & Neven Valev, 2003. "Tax Structures and FDI: The Deterrent Effects of Complexity and Uncertainty," Fiscal Studies, Institute for Fiscal Studies, vol. 24(3), pages 341-359, September.
  14. Eckhard Janeba, 1993. "Foreign Direct Investment under Oligopoly: Profit Shifting of Profit Capturing?," Discussion Paper Serie A 420, University of Bonn, Germany.
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  16. Norbäck, Pehr-Johan, 1999. "Multinational Firms, Technology and Location," Working Paper Series 512, Research Institute of Industrial Economics, revised 02 Nov 2000.
  17. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
  18. 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.
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  23. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2005. "Estimating Models of Complex FDI: Are There Third-Country Effects?," Center for Policy Research Working Papers 73, Center for Policy Research, Maxwell School, Syracuse University.
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  26. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
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