Trade Credit and Taxes

Mihir A. Desai, C. Fritz Foley and James Hines
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Mihir A. Desai: Harvard University and NBER
C. Fritz Foley: Harvard University and NBER

The Review of Economics and Statistics, 2016, vol. 98, issue 1, 132-139

Abstract: This paper analyzes the extent to which tax differences affect the use of trade credit. U.S.-owned affiliates in low-tax countries use trade credit to lend, whereas those in high-tax countries use trade credit to borrow: 10% lower local tax rates are associated with net trade credit positions that are 1.4% higher as a fraction of sales. The use of trade credit to get capital out of low-tax, low-return environments is also illustrated by the temporary repatriation tax holiday in 2005, which was used most intensively by affiliates with positive net trade credit positions.

JEL-codes: F23 G32 H25 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Trade Credit and Taxes (2012)
Working Paper: Trade Credit and Taxes (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:98:y:2016:i:1:p:132-139

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