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Working Paper No. 833

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

Working Paper
Reference
B. Davies, Ronald, Pehr-Johan Norbäck and Ayça Tekin-Koru (2010). “The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata”. IFN Working Paper No. 833. Stockholm: Research Institute of Industrial Economics (IFN).

Authors
Ronald B. Davies, Pehr-Johan Norbäck, Ayça Tekin-Koru

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 behavior of multinationals along some dimensions but not along others.

Pehr-Johan Norbäck

+46 (0)8 665 4522
+46 (0)73 574 3379
pehr-johan.norback@ifn.se