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Multinational Firms and Tax Havens

Author

Listed:
  • Anna Gumpert

    (LMU Munich and CESifo)

  • James R. Hines Jr.

    (University of Michigan and NBER)

  • Monika Schnitzer

    (LMU Munich, CESifo, and CEPR)

Abstract

Multinational firms with operations in high-tax countries can benefit the most from reallocating taxable income to tax havens, though this is sufficiently difficult and costly that only 20.4% of German multinational firms have any tax haven affiliates. Among German manufacturing firms, a 1 percentage point higher foreign tax rate is associated with a 2.3% greater likelihood of owning a tax haven affiliate. This is consistent with tax avoidance incentives and contrasts with earlier evidence for U.S. firms. The relationship is less strong for firms in service industries, possibly reflecting the difficulty of reallocating taxable service income.

Suggested Citation

  • Anna Gumpert & James R. Hines Jr. & Monika Schnitzer, 2016. "Multinational Firms and Tax Havens," The Review of Economics and Statistics, MIT Press, vol. 98(4), pages 713-727, October.
    • Handle: RePEc:tpr:restat:v:98:y:2016:i:4:p:713-727
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    References listed on IDEAS

    as
    1. Martin Ruf & Alfons J. Weichenrieder, 2012. "The taxation of passive foreign investment: lessons from German experience," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1504-1528, November.
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    More about this item

    JEL classification:

    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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