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

46 Pages Posted: 2 Feb 2011

See all articles by Ronald B. Davies

Ronald B. Davies

University of Oregon - Department of Economics

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Ayça Tekin-Koru

TED University

Multiple version iconThere are 2 versions of this paper

Date Written: May 19, 2010

Abstract

This paper uses affiliate level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behavior of multinationals along some dimensions but not along others.

Keywords: Tax Treaties, Multinational Firms, Foreign Direct Investment

JEL Classification: F21, F23, H25

Suggested Citation

Davies, Ronald B. and Norbäck, Pehr-Johan and Tekin-Koru, Ayca, The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata (May 19, 2010). IFN Working Paper No. 833. Available at SSRN: https://ssrn.com/abstract=1752943 or http://dx.doi.org/10.2139/ssrn.1752943

Ronald B. Davies

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
(541) 346-4671 (Phone)

Pehr-Johan Norbäck (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Ayca Tekin-Koru

TED University ( email )

Department of Business Administration
Ziya Gokalp Bulvari No: 48
Ankara, 06420
Turkey
+90 312 535 0034 (Phone)

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