Tax treaties and foreign equity holding companies of multinational corporations

Sunghoon Hong ()
Additional contact information
Sunghoon Hong: University of Seoul

Review of Managerial Science, 2022, vol. 16, issue 2, No 7, 483-520

Abstract: Abstract Multinational corporations can organize indirect ownership chains with foreign equity holding companies in countries with low taxes and favorable tax treaties. This paper examines the relationship between tax treaty networks, multinational ownership chains, and effective tax rates by combining ownership and accounting data of multinational corporations with a network analysis of tax treaties. Empirical results suggest that multinational corporations organize direct or indirect ownership chains, consistent with the structure of tax-minimizing routes in a treaty network. The existence of a tax-minimizing direct route is estimated to decrease the probability of using a foreign equity holding company in an ownership chain by 6.2 percentage points. The existence of a tax-minimizing indirect route via a country is estimated to increase the probability of locating a foreign equity holding company in the country by 22.0 percentage points. Furthermore, multinational corporations appear to reduce their effective tax rates by using foreign equity holding companies in ownership chains.

Keywords: Multinational corporation; Foreign equity holding company; Treaty network; Ownership chain; Effective tax rate (search for similar items in EconPapers)
JEL-codes: F23 H25 H87 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11846-021-00448-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:rvmgts:v:16:y:2022:i:2:d:10.1007_s11846-021-00448-x

Ordering information: This journal article can be ordered from
http://www.springer.com/business/journal/11846

DOI: 10.1007/s11846-021-00448-x

Access Statistics for this article

Review of Managerial Science is currently edited by R. Ewert and W. Kürsten

More articles in Review of Managerial Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().