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

Author

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  • Agustin S. Benetrix

    (Department of Economics, Trinity College Dublin)

  • Andre Sanchez Pacheco

    (Department of Economics, Trinity College Dublin)

Abstract

We document a robust relation between corporate tax differentials and U.S. 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 U.S. multinationals taking advantage of tax differentials in ways that go beyond what is captured by traditional Balance of Payments procedures.

Suggested Citation

  • Agustin S. Benetrix & Andre Sanchez Pacheco, 2021. "Corporate Taxation and International Financial Integration: U.S. evidence from a consolidated perspective," Trinity Economics Papers tep0321, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep0321
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    Cited by:

    1. Sanchez Pacheco, André, 2022. "A consolidated-by-nationality approach to Irish foreign exposure," International Economics, Elsevier, vol. 170(C), pages 235-247.
    2. Arrigoni, Simone, 2024. "Who gets the flow? Financial globalisation and wealth inequality," Journal of Macroeconomics, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    International financial integration; financial globalisation; 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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