The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata

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Davies R. B., Norback P., Tekin Koru A.

WORLD ECONOMY, vol.32, no.1, pp.77-110, 2009 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 32 Issue: 1
  • Publication Date: 2009
  • Doi Number: 10.1111/j.1467-9701.2009.01158.x
  • Journal Name: WORLD ECONOMY
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.77-110
  • TED University Affiliated: No

Abstract

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.