It’s All in the Timing: Assessing the Impact of Bilateral Tax Treaties on U.S. FDI Activity

Millimet, Daniel L.; Kumas, Abdullah

doi:10.1093/acprof:oso/9780195388534.003.0022

Cited by 7 publications

(3 citation statements)

References 69 publications

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“…Yet the evidence for such an effect is inconclusive. Until 2009, academic studies found a mixed effect of tax treaties on investment flows: positive, neutral or in some instances negative, the latter attributed to tax evading investors likely to be put off by the improved enforcement powers provided by tax treaties (Blonigen & Davies, ; Coupé, Orlova, & Skiba, ; Davies, ; Egger, Larch, Pfaffermayr, et al, ; Louie & Rousslang, ; Millimet & Kumas, ; Neumayer, ). Positive effects on investment were more commonly found for treaties between developed countries than those involving a developing country.…”

Section: The Questionable Case For Tax Treatiesmentioning

confidence: 99%

When Do Developing Countries Negotiate Away Their Corporate Tax Base?

Hearson

2018

J of Intl Development

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Developing countries have concluded thousands of bilateral tax treaties, which restrict their 'taxing rights' over international investment. Qualitative case studies of these negotiation outcomes emphasize power politics, knowledge asymmetries and negotiating capability in the eventual distribution of taxing rights between signatories, yet such insights are absent from crosscountry quantitative work. This paper bridges the gap by replicating two quantitative studies, introducing new data on countries' ability to mobilize tax revenue and the outcomes of tax treaty negotiations. It provides statistical support for the insights from qualitative research. The size of a government's revenue base, and its reliance on corporate tax, might affect the salience of the revenue sacrifice in policy makers' minds. These variables influence the likelihood of signing a tax treaty and the particular concessions made. Power asymmetries between signatories lead to more unequal distributions of taxing rights away from developing countries, in contrast to the findings of earlier studies. Developing countries also become better negotiators as they gain experience.

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Section: The Questionable Case For Tax Treatiesmentioning

confidence: 99%

When Do Developing Countries Negotiate Away Their Corporate Tax Base?

Hearson

2018

J of Intl Development

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“…Yet the evidence for such an effect is inconclusive. Until 2009, academic studies found a mixed effect of tax treaties on investment flows: positive, neutral, or in some instances negative, the latter attributed to tax evading investors likely to be put off by the improved enforcement powers provided by tax treaties (Blonigen and Davies 2004;Coupé et al 2009;Davies 2004;Egger et al 2006;Louie and Rousslang 2008;Millimet and Kumas 2009;Neumayer 2007). Positive effects on investment were more commonly found for treaties between developed countries than those involving a developing country.…”

Section: The Questionable Case For Tax Treatiesmentioning

confidence: 99%

What makes countries negotiate away their corporate tax base?

Hearson¹

2017

WIDER Working Paper

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Abstract: Qualitative case studies suggest that the outcomes of tax treaty negotiations are determined by power politics and negotiating capability. In contrast, quantitative studies have tended to depart from a model that implies absolute gains, full rationality, and perfect information on the part of both treaty signatories. This paper bridges the gap by replicating two existing quantitative studies, introducing new, more sophisticated data. New fiscal data are drawn from the ICTD Government Revenue Dataset, while treaty content is measured using the ActionAid Tax Treaties Dataset. It finds that developing countries that raise more corporate income tax are more likely to sign tax treaties with wealthier countries, and more likely to negotiate higher withholding tax rates in those treaties, but not more likely to obtain a better negotiated result overall. In contrast, developing countries that raise more revenue in total are more likely to negotiate better outcomes in other clauses of the treaty that are more obscure and technically complex. There is also a strong learning effect, with better outcomes across the board as a developing country gains experience of signing tax treaties. Finally, greater asymmetries in investment stocks and material capabilities lead to worse outcomes for developing countries.

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“…Other studies find no or negative effects of DTTs on FDI (e.g. Baker, 2014;Davies et al, 2010;Louie & Rousslang, 2008;Millimet & Kumas, 2008). While some authors like Baker (2014) argue that DTTs simply do not impact FDI decisions, others like Coupé, Orlova and Skiba (2009) or Blonigen et al (2014) attribute inconclusive findings to the conflicting single provisions in the DTTs.…”

Section: Previous Literature On the Effects Of Dtts On Fdi Activitymentioning

confidence: 99%

The Effects of Double Tax Treaties for Developing Countries. A Case Study of Austria's Double Tax Treaty Network

Braun,

Fuentes

2016

Public Finance and Management

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To what degree developing countries gain from signing double tax treaties is being hotly debated. in this paper, we analyze Austrian tax treaty policy. We find that developing countries are likely to expect both positive and negative impacts from signing a double tax treaty (DTT) with Austria. On the one hand, the results of our econometric analysis suggest that middle-income countries signing a DTT with Austria may expect an increased number of foreign direct investment projects from Austrian companies. On the other hand, an overview of the institutional background shows that the signatory states may suffer from limited withholding taxation rights established in DTTs for the source country, which could lead to reduced tax revenues in developing countries. the paper also discusses policy options for developing countries.

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It’s All in the Timing: Assessing the Impact of Bilateral Tax Treaties on U.S. FDI Activity

Cited by 7 publications

References 69 publications

When Do Developing Countries Negotiate Away Their Corporate Tax Base?

When Do Developing Countries Negotiate Away Their Corporate Tax Base?

What makes countries negotiate away their corporate tax base?

The Effects of Double Tax Treaties for Developing Countries. A Case Study of Austria's Double Tax Treaty Network

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