How Elastic is the Demand for Tax Havens? Evidence from the Us Possessions Corporations Tax Credit

15 Pages Posted: 4 Feb 2019 Last revised: 9 Feb 2019

See all articles by Daniel Garrett

Daniel Garrett

Duke University

Juan Carlos Suárez Serrato

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2019

Abstract

Why do some firms adopt certain tax havens and how sensitive is the demand for tax havens? We address these questions by studying how the repeal of Section 936 tax credits affected firms with affiliates in Puerto Rico. We first describe the characteristics of US multinationals that were exposed to Section 936. We then show that the market value of exposed firms decreased after losing access to Section 936, implying that firms could not perfectly substitute to other tax havens. Finally, we find that firms exposed to Section 936 did not respond by expanding their network of tax havens.

Suggested Citation

Garrett, Daniel and Suárez Serrato, Juan Carlos, How Elastic is the Demand for Tax Havens? Evidence from the Us Possessions Corporations Tax Credit (January 2019). NBER Working Paper No. w25516, Available at SSRN: https://ssrn.com/abstract=3328383

Juan Carlos Suárez Serrato

Duke University - Department of Economics ( email )

Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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