Tax Policy and the Activities of Multinational Corporations

56 Pages Posted: 4 Feb 1997 Last revised: 10 Oct 2022

Date Written: May 1996


This paper reviews quantitative studies of the impact of international tax rules on the financial and real behavior of multinational firms. The evidence, much of it recent, indicates that taxation significantly influences foreign direct investment, corporate borrowing, transfer pricing, dividend and royalty payments, R&D activity, exports, bribe payments, and location choices. While taxes appear to influence a wide range of activity, the literature does not offer many subtle tests designed to distinguish different theories of the effects of taxation on multinational firms. The paper evaluates the reliability of existing evidence and its implications for the design of international tax policy.

Suggested Citation

Hines, James Rodger, Tax Policy and the Activities of Multinational Corporations (May 1996). NBER Working Paper No. w5589, Available at SSRN:

James Rodger Hines (Contact Author)

University of Michigan ( email )

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