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 relvant DTT at around 22%. Second, significant tax reductions due
to treaty benefits will lead to an increase in FDI. / Series: WU International Taxation Research Paper Series
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:6071 |
| Date | 18 February 2018 |
| Creators | Petkova, Kunka, Stasio, Andrzej, Zagler, Martin |
| Publisher | WU Vienna University of Economics and Business, Universität Wien |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Paper, NonPeerReviewed |
| Format | application/pdf |
| Relation | https://ssrn.com/abstract=3126593, http://epub.wu.ac.at/6071/ |
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