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The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata
Author(s) -
Davies Ronald B.,
Norbäck PehrJohan,
TekinKoru Ayça
Publication year - 2009
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2009.01158.x
Subject(s) - microdata (statistics) , multinational corporation , treaty , international economics , tax treaty , economics , monetary economics , international trade , business , withholding tax , ad valorem tax , double taxation , tax avoidance , public economics , law , finance , population , demography , sociology , political science , census
This paper uses affiliate‐level data from Swedish multinationals to examine the impact of tax treaties on both overall affiliate sales and the composition of those sales. In line with previous results, we find little evidence for an effect of treaties on the level of total sales. We do, however, find that a tax treaty increases the probability of investment by a firm in a given country. In addition, we find that a treaty reduces exports to the parent but increases imports of intermediate inputs from the parent. This is consistent with treaties increasing the effective host tax. This suggests that tax treaties impact the behaviour of multinationals along some dimensions but not along others.