TY  - JOUR
AU  - Blonigen, Bruce A
AU  - Oldenski, Lindsay
AU  - Sly, Nicholas
TI  - Separating the Opposing Effects of Bilateral Tax Treaties
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17480
PY  - 2011
Y2  - October 2011
DO  - 10.3386/w17480
UR  - http://www.nber.org/papers/w17480
L1  - http://www.nber.org/papers/w17480.pdf
N1  - Author contact info:
Bruce Blonigen
Department of Economics
1285 University of Oregon
Eugene, OR 97403-1285
Tel: 541/346-4680
Fax: 541/346-1243
E-Mail: bruceb@uoregon.edu

Lindsay Oldenski
Georgetown University
37th and O Streets, NW
Washington DC, 20057 
E-Mail: Lindsay.Oldenski@georgetown.edu

Nicholas Sly
Federal Reserve Bank of Kansas City
1 Memorial Dr
Kansas City, MO 64198
E-Mail: Nick.Sly@kc.frb.org
M1  - published as Bruce A. Blonigen, Lindsay Oldenski, Nicholas Sly. "The Differential Effects of Bilateral Tax Treaties," in Michael Devereux and Roger Gordon, organizers, "Business Taxation (Trans-Atlantic Public Economics Seminar)" American Economic Journal: Economic Policy, Volume 6, no. 2 (2014)

AB  - Bilateral tax treaties (BTT) are intended to promote foreign direct investment and foreign affiliate activity through double taxation relief.  However, BTTs also typically contain provisions that facilitate sharing of tax information between countries intended to curtail tax avoidance by multinational firms. These provisions should disproportionately affect firms that intensively use inputs for which an arms-length price is easily observed, since strategic transfer practices that manipulate tax liabilities are no longer effective with information sharing between countries. Using BEA firm-level data we are able to separately estimate the impacts of double-taxation relief and sharing of tax information on investment behavior of US multinational firms. We find a significant positive effect of new tax treaties on foreign affiliate activity between member nations that is offset (and even reversed) the more a firm relies on inputs traded on an organized exchange (i.e., inputs for which the arms-length price is easily observed). We find these opposing BTT effects for both the intensive margin (sales of existing affiliates) and the extensive margin (entry of new affiliates).
ER  -