Petkova, Kunka, Stasio, Andrzej, Zagler, Martin. 2018. On the relevance of double tax treaties in the presence of treaty shopping. WU International Taxation Research Paper Series No. 2018-05.
BibTeX
Abstract
This paper investigates the effects of double tax treaties (DTTs) on foreign direct investment (FDI) after controlling for their relevance in the presence of treaty shopping. DTTs cannot be considered a bilateral issue, but must be viewed as a network, since FDI can flow from home to host country through one or more conduit countries. By accounting for treaty shopping, we calculate the shortest (i.e. the cheapest) tax distance between any two countries allowing the corporate income to be channelled through intermediate jurisdictions. We differentiate between relevant and neutral DTTs - i.e. tax treaties that offer investors a financial advantage - and irrelevant DTTs and use these data to derive two important results. First, only relevant and neutral tax treaties increase bilateral FDI, whereas irrelevant DTTs do not. We can quantify the increase of FDI due to a relevant DTT at around 22%. Second, significant tax reductions due to treaty benefits will lead to an increase in FDI.
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Status of publication | Published |
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Affiliation | WU |
Type of publication | Working/discussion paper, preprint |
Language | English |
Title | On the relevance of double tax treaties in the presence of treaty shopping |
Title of whole publication | WU International Taxation Research Paper Series No. 2018-05 |
Year | 2018 |
URL | http://dx.doi.org/10.2139/ssrn.3126593 |
JEL | F21, F23, F53, H25, H26, H73, H87, K34 |
Associations
- People
- Petkova, Kunka (Former researcher)
- Stasio, Andrzej (Former researcher)
- Zagler, Martin (Details)
- Organization
- Research Institute for International Taxation FI (Details)
- Department of Economics (Crespo Cuaresma) (Details)
- Research areas (ÖSTAT Classification 'Statistik Austria')
- 5311 Public finance (Details)
- 5341 Economic policy (Details)
- 5343 Economic theory (Details)