International Tax Spillovers and Tangible Investment, with Implications for the Global Minimum Tax

Michael Keen, Li Liu and Hayley Pallan

No 10427, Policy Research Working Paper Series from The World Bank

Abstract: This paper articulates and, using newly-assembled data, explores how international taxation affects aggregate tangible cross-border investment. Spillovers from statutory tax rates abroad seem: As sizable as effects from the host’s rate; larger than previous consensus values (attributed to a systematic bias from FDI data); and consistent with ‘implicit’ profit shifting through real investment (rather than ‘paper’ profit shifting). Contrary to much policy discussion, the results also imply that: Host countries’ marginal effective tax rates have at best a weak effect on real investment; those elsewhere have none; and, applied to the prospective global minimum tax, inward tangible investment in most sample countries will increase.

Date: 2023-05-01
New Economics Papers: this item is included in nep-int and nep-pbe
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Working Paper: International Tax Spillovers and Tangible Investment, with Implications for the Global Minimum Tax (2023)
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