Corporate Inversions: Going Beyond Tax Incentives
49 Pages Posted: 20 Mar 2016 Last revised: 13 Apr 2018
Date Written: April 2018
We identify new stylized facts about corporate inversions. Our analysis is based on a hand-collected dataset of 691 inversions out of 11 home countries into 45 host destinations over the 1996-2013 period. First, the majority of these inversions are conducted by non-U.S.-based firms. Second, inversions are not entirely tax-driven. Even though firms are more likely to invert to countries with lower tax rates, 62% of sample inversions are into non-tax havens and among these, half are into host destinations with higher statutory tax rates than those faced at home. Third, governance factors are important determinants of inversion decisions. Firms tend to invert to destinations with similar governance standards and inversion activity increases as the transparency of the host destination, specifically tax havens, improves. Overall, governance considerations may explain why not all firms invert.
Keywords: Inversions, Tax havens, Tax avoidance, Corporate governance, Cross-border flows
JEL Classification: G34, H26
Suggested Citation: Suggested Citation