Multi-Jurisdictional Tax Incentives and the Location of Innovative Activities

MacDonald, Christy

doi:10.2139/ssrn.1905185

Cited by 5 publications

(6 citation statements)

References 50 publications

(102 reference statements)

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“…We separately measure expenditure‐based R&D tax incentives using Thomson's (2017) approach for estimating the after‐tax costs of R&D and income‐based R&D tax incentives using one minus the tax rate on intangible income in each country (Evers et al 2013). Consistent with the literature (Berger 1993; Bloom et al 2002; Klassen et al 2004; Wilson 2009; MacDonald 2011; Yang et al 2012), we find that R&D investments are positively associated with R&D tax incentives. Consistent with our predictions, this effect is stronger for firms with more extensive cross‐border collaboration.…”

Section: Introductionsupporting

confidence: 91%

“…The dependent variable captures the proportion or intensity of R&D activity that a firm locates in a given country (MacDonald 2011; Nandkumar and Srikanth 2016). Because firms may not be able to garner benefits from changes in tax incentives immediately, we measure R&D activity in year t + 1 relative to tax incentives 14 .…”

Section: Empirical Methodologymentioning

confidence: 99%

“…where Capital (Current) Component is the country j, year t after tax price of capital (current) R&D expenditures from Thomson (2017) and Capital Ratio is the industry d, year t ratio of PPENT/AT. To capture income-based tax incentives for each country, we start with ordinary corporate income tax rates from the KPMG Corporate Tax Survey (KPMG International 2006, 2011. Because the KPMG data are first available in 1993, we use tax rates from Thomson (2013) to fill missing tax rates between 1981 and 1993.…”

Section: Methodsmentioning

confidence: 99%

“…To test this hypothesis, we interact TaxIncentive with HighCollab and expect a positive coefficient on this variable (β 3 > 0). We include a vector of control variables ( P Control k ) for country and firm characteristics that are commonly included in previous research that investigates the determinants of R&D investments (Furman et al 2002;Hu and Mathews 2005;Park 2008;Dischinger and Riedel 2011;MacDonald 2011;Doh and Kim 2014). All variables are defined in Appendix 2.…”

Section: Methodsmentioning

confidence: 99%

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R&D Investments and Tax Incentives: The Role of Intra‐Firm Cross‐Border Collaboration*

Huang

Krull²,

Ziedonis

2020

Contemporary Accting Res

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U.S. multinational corporations increasingly use intra-firm, cross-border research collaboration to disperse R&D across different countries. This paper investigates the implications of such collaboration on the abilities of firms to garner benefits from R&D tax incentives. We find that the association between R&D intensity and tax incentives is three to five times larger when firms have extensive cross-border collaboration connected to a country. We also find that the effect is stronger when local intellectual property protection is weaker and when local innovation resources are higher. Our results suggest that cross-border collaboration helps firms achieve more tax-efficient R&D investments both by reducing the nontax frictions posed by weak intellectual property protection and by increasing the nontax benefits of foreign R&D.

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Section: Introductionsupporting

confidence: 91%

Section: Empirical Methodologymentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

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R&D Investments and Tax Incentives: The Role of Intra‐Firm Cross‐Border Collaboration*

Huang

Krull²,

Ziedonis

2020

Contemporary Accting Res

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“…16 16 Because tax returns that might allow us to incorporate details of foreign operations and specific deductions like the U.S. production activities deduction are not publicly available for our sample, we compute the average foreign tax rate and use the U.S. statutory tax rate for our proxy. In the more detailed settings of Mills and Newberry [2004] and MacDonald [2009], where both cross‐country average and country‐specific statutory rates are used, the average tax rate is found to be more consistently related to the respective tax planning than country‐specific statutory tax rates. …”

mentioning

confidence: 94%

Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?

Klassen

Laplante

2012

J of Accounting Research

270

131

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This paper examines income shifting of U.S. multinational companies over the past two decades. Domestic and foreign policy makers are increasingly concerned with the effect of income shifting on dwindling tax revenues, however, extant research on income shifting by U.S. multinational enterprises is mixed. We address the disconnect between the academic literature and the policy maker's perceptions by examining the extent of multijurisdictional income shifting by U.S. multinational companies. We directly address conflicting results in extant literature and show that using either multiperiod proxies or instrumental variables overcomes weaknesses of annual proxies in this setting. Our tests show that U.S. companies have become more active at shifting income out of the United States as the regulatory costs of shifting have changed. Holding tax rate differences between U.S. and foreign jurisdictions constant, our empirical estimates suggest that our sample of 380 corporations with low average foreign tax rates collectively shifts approximately $10 billion of additional income out of the United States annually during 2005-2009 relative to 1998-2002 due to varying regulatory costs of shifting.

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Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?

Klassen

Laplante

2012

SSRN Journal

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Multi-Jurisdictional Tax Incentives and the Location of Innovative Activities

Cited by 5 publications

References 50 publications

R&D Investments and Tax Incentives: The Role of Intra‐Firm Cross‐Border Collaboration*

R&D Investments and Tax Incentives: The Role of Intra‐Firm Cross‐Border Collaboration*

Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?

Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?

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