U.S. Multinationals’ Alternatives to Paying Taxes

50 Pages Posted: 13 Dec 2019 Last revised: 27 Jan 2022

See all articles by Jeremiah Harris

Jeremiah Harris

Kent State University - Department of Finance

William O'Brien

University of Illinois at Chicago

Date Written: January 25, 2022

Abstract

We investigate how U.S. multinationals’ pre-2018 capital structure and tax planning actions were affected by potential repatriation taxes. We construct a proxy for exogenous changes to repatriation tax rates and find it is positively associated with bond issuance and debt ratios, but only for repatriation-tax-sensitive multinationals. These results are concentrated in firms with lower costs of debt capital. Additionally, after repatriation tax increases, tax-sensitive multinationals were more likely to pursue tax-free repatriation techniques (we provide several examples of these complex, lesser-known techniques) but not more likely to pursue inversions. Our findings have important implications for current and proposed tax policies.

Keywords: Inversions, Taxes, Multinational Firms, Corporate Innovation

JEL Classification: G3, G34, G38, H26, H32

Suggested Citation

Harris, Jeremiah and O'Brien, William, U.S. Multinationals’ Alternatives to Paying Taxes (January 25, 2022). Available at SSRN: https://ssrn.com/abstract=3493922 or http://dx.doi.org/10.2139/ssrn.3493922

Jeremiah Harris (Contact Author)

Kent State University - Department of Finance ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States

William O'Brien

University of Illinois at Chicago ( email )

601 S. Morgan St.
Chicago, IL 60607
United States

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