Asymmetric FDI and tax-treaty bargaining: theory and evidence

• 成果类型: Article; Proceedings Paper
• 署名作者: Chisik, R; Davies, RB
• 署名单位: State University System of Florida; Florida International University; University of Oregon
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/S0047-2727(03)00059-8
• 发表日期: 2004
• 页码: 1119-1148
• 关键词: foreign direct investment; tax treaties; Multinational corporations; bargaining; Withholding taxes

摘要

Tax treaties are often viewed as a mechanism for eliminating tax competition, however, this approach ignores the need for bargaining over the treaty's terms. This paper focuses on how bargaining can affect the withholding taxes set under the treaty. In a simple framework, we develop hypotheses about patterns in treaty tax rates. A key determinant for these patterns is the relative size of bilateral foreign direct investment (FDI) activity. In plausible situations, more asymmetric countries will negotiate treaties with higher tax rates. This theory is then tested using 1992 data from US and Organization for Economic Cooperation and Development (OECD) bilateral tax treaties. Overall, the data supports the prediction that greater asymmetric FDI activity increases the negotiated tax rates. (C) 2003 Elsevier B.V. All rights reserved.