E-Commerce and International Tax Planning

Abstract:     
This paper investigates whether the increased flexibility afforded by e-commerce has allowed firms to increase their tax planning activities. We specifically address whether multinational firms that make greater use of e-commerce have greater sensitivity to tax incentives relative to firms making less use of e-commerce. Using proxies for e-commerce activity, we find that the relation between exports and tax incentives is increasing in the e-commerce measures. Alternative tests of foreign tax expense and country-level trade activity corroborate the main test. This research is an important first step in understanding the larger impact of e-commerce on international tax planning behavior.

Number of Pages in PDF File: 42

Keywords: International Tax Planning, Electronic Commerce, Foreign Trade

JEL Classification: H25, O33, F23

working papers series