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Effects of overseas subsidiaries on worldwide corporate taxes

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  • Lee, Namryoung
  • Swenson, Charles

Abstract

We propose and test a simple model of international tax shifting, which shows that multinational firms’ abilities to engage in tax arbitrage are functions of the benefits and costs of doing so. We use a large database of publicly traded firms of over 200 countries and hand-collect tax rates for all subsidiaries for such firms. We find that firms’ effective tax rates are lower if the countries in which they operate vary significantly in their statutory rates and that firms’ effective rates are higher the more countries they operate in and the more subsidiaries they have.

Suggested Citation

  • Lee, Namryoung & Swenson, Charles, 2016. "Effects of overseas subsidiaries on worldwide corporate taxes," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 26(C), pages 47-59.
    • Handle: RePEc:eee:jiaata:v:26:y:2016:i:c:p:47-59
    DOI: 10.1016/j.intaccaudtax.2016.02.001
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    References listed on IDEAS

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    Cited by:

    1. Steens, Bert & Roques, Thibaut & Gonnet, Sébastien & Beuselinck, Christof & Petutschnig, Matthias, 2022. "Transfer pricing comparables: Preferring a close neighbor over a far-away peer?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    2. Rougé Jean-François & Chopov Borislav, 2016. "Hypercompetition & Fiscal Attractiveness," Economics, Sciendo, vol. 4(2), pages 75-93, December.
    3. Alfred Tran & Wanmeng Xu, 2024. "A study of cross‐border profit shifting channels: Evidence from Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 869-901, March.

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