The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements

Julia Braun and Martin Zagler

No 17-011, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Out of a total of 2,976 double tax agreements (DTAs), some 60% are signed between a developing and a developed economy. As DTAs shift taxing rights from capital importing to capital exporting countries, the prior would incur a loss. We demonstrate in a theoretical model that in a deal one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA, this requires compensation from the capital exporting country to the capital importing country. We provide empirical evidence that such compensation is indeed paid, for instance in the form of bilateral official development assistance, which increases on average by six million US$ in the year of the signature of a DTA.

Keywords: developing countries; foreign aid; double taxation agreements (search for similar items in EconPapers)
JEL-codes: D82 F53 H25 H87 K33 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-acc and nep-pub
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements (2018)
Working Paper: The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements (2017)
Working Paper: The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements (2017)
Working Paper: The true art of the tax deal: Evidence of aid flows and bilateral double tax agreements (2017)
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