The Differential Effects of Bilateral Tax Treaties

Bruce Blonigen, Lindsay Oldenski and Nicholas Sly

Chapter 7 in Foreign Direct Investment, 2019, pp 235-263 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Bilateral tax treaties (BTTs) are intended to promote foreign direct investment through double-taxation relief. Using BEA firm-level data, we find a positive effect of BTTs on FDI, which is larger for firms that use differentiated inputs. BTTs allow multinational firms to request assistance from treaty partners’ governments if they have a grievance about how tax liabilities are determined. These provisions disproportionately benefit firms that use inputs for which an arm’s-length price is difficult to observe, since allocation of earnings across countries is more complex. We find differential BTT effects for both sales by existing affiliates and entry of new affiliates.

Keywords: Foreign Direct Investment; Multinational Enterprises; Mergers and Acquisitions; Greenfield; Trade Policy; Taxation; Spillovers; Offshoring; Wage Inequality; Firm-Specific Assets; Antidumping; Tariff-jumping; Industrial Organization; Ownership-Location-Internalization Theory (search for similar items in EconPapers)
JEL-codes: F02 F13 F6 (search for similar items in EconPapers)
Date: 2019
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Related works:
Journal Article: The Differential Effects of Bilateral Tax Treaties (2014)
Chapter: The Differential Effects of Bilateral Tax Treaties (2012)
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