Global Organizations and Taxes: An Analysis of the Dividend, Interest, Royalty, and Compensation Payments between U.S. Multinationals' Foreign Affiliates
Posted: 14 Jul 1998
Date Written: November 1995
This study investigates the importance of multinational tax planning for global enterprises by examining cross-border payments of dividends, interest, royalties and compensation between commonly-owned foreign affiliates of U.S. multinationals. Using data from the multinationals' actual U.S. tax returns, we find dividends, royalties and sometimes interest are negatively correlated with the cumulative income and withholding taxes levied on cross-border transfers. We find no evidence that compensation payments are correlated with taxes. The findings are consistent with human capital contracts encountering more adverse non-tax considerations than equity, debt, and intangible property contracts.
JEL Classification: F21, F23, G15, G30, H25
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