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

Davies, Ronald B.; Norbäck, Pehr‐Johan; Tekin‐Koru, Ayça

doi:10.2139/ssrn.1752943

Cited by 26 publications

(35 citation statements)

References 21 publications

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“…Positive effects on investment were more commonly found for treaties between developed countries than those involving a developing country. Since then, the balance has tipped towards studies finding positive effects through the use of more comprehensive bilateral investment data (Barthel, Busse, & Neumayer, ; Lejour, ) and foreign affiliate microdata (Blonigen, Oldenski, & Sly, ; Davies, Norbäck, & Tekin‐Koru, ; Egger & Merlo, ).…”

Section: The Questionable Case For Tax Treatiesmentioning

confidence: 99%

“…Firm‐level data avoid this difficulty, but coverage of developing countries is poor, a problem given the differential effects found in earlier studies. Only Davies et al () have sufficient coverage of sub‐Saharan countries, for example, to be able to draw any conclusions about that region. These studies are all to different degrees susceptible to the concern that what they are measuring is tax treaties' responding to, rather than causing, changing patterns of inward investment.…”

Section: The Questionable Case For Tax Treatiesmentioning

confidence: 99%

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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%

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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“…2. The evidence for an investment-promoting effect in developing countries is, however, mixed (Barthel, Busse, & Neumayer, 2009;Davies, Norb€ ack, & Tekin-Koru, 2009;Lejour 2014;Sauvant & Sachs, 2009). 3.…”

Section: Notesmentioning

confidence: 99%

Transnational expertise and the expansion of the international tax regime: imposing ‘acceptable’ standards

Hearson

2018

Review of International Political Economy

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Global economic governance outcomes in areas such as corporate taxation may be influenced by transnational policy communities acting at national and transnational levels. Yet, while transnational tax policy processes are increasingly analyzed through the politics of expertise, national preferences have usually been derived from domestic interest group preferences. We know little about how technical expertise interacts with interest group politics at national level, an important deficit given the sovereignty-preserving, decentralized way in which transnational tax norms become hard law. This article examines the drivers of expansion of the UK's bilateral tax treaty network in the 1970s, which cannot be explained solely through monolithic interest group politics. Evidence from the British national archives demonstrates how tax experts in the civil service and the private sector, members of a transnational policy community, used tax treaties to impose OECD standards for taxing British firms on host countries, at times overruling the preferences of other political, bureaucratic and business actors. Expertise politics and business power may shape the development of norms and focal points within a transnational policy community, but it is often their interaction at domestic level that determines the implementation of transnational norms as hard law.

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“…Each of these trade flows may have a different effect on domestic labor market outcomes and is subject to different 4 Closely related prior work uses variation based at least partly on year-to-year changes in affiliate-country GDP (Desai et al, 2009) or wages (Brainard and Riker, 1997;Slaughter, 2000;Muendler and Becker, 2010;Harrison and McMillan, 2011). Permanent reductions in the cost of offshore activity following a a BTT more closely parallel the secular declines in offshoring costs during recent decades 5 See, for example, Blonigen and Davies (2004), Davies (2004), di Giovanni (2005, Egger et al (2006), Louie and Rousslang (2008), Davies et al (2009), andBlonigen et al (2014).…”

Section: Introductionmentioning

confidence: 99%

“…diGiovanni (2005), Blonigen andDavies (2005), andDavies et al (2009) also find no robust relationship between BTTs and FDI activity at an aggregate level.18 100 * (exp(0.064) − 1) = 6.6.…”

mentioning

confidence: 98%

The Labor Market Effects of Offshoring by U.S. Multinational Firms

Kovak

Oldenski

Sly

2021

The Review of Economics and Statistics

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We use firm-level data on U.S. multinationals to show how offshoring affects domestic employment within and across firms. We introduce a new instrument for offshoring: Bilateral Tax Treaties, which reduce the cost of offshore activities. We find substantial heterogeneity in effects. A 10 percent increase in affiliate employment drives a 1.3 percent increase in employment at the U.S. parent firm, with smaller effects at the industry and regional levels. In contrast, offshoring by vertical multinationals drives declining employment among non-multinationals in the same industry, and firms opening new affiliates exhibit smaller domestic employment growth than those expanding existing affiliates.

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

Cited by 26 publications

References 21 publications

When Do Developing Countries Negotiate Away Their Corporate Tax Base?

When Do Developing Countries Negotiate Away Their Corporate Tax Base?

Transnational expertise and the expansion of the international tax regime: imposing ‘acceptable’ standards

The Labor Market Effects of Offshoring by U.S. Multinational Firms

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