Tax Reform in Open Economies
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Tax Reform in Open Economies

International and Country Perspectives

Edited by Iris Claus, Norman Gemmell, Michelle Harding and David White

The eminent contributors (including Altshuler, Creedy, Freebairn, Gravelle, Heady, Kalb, Sørensen and Zodrow) investigate the beneficial directions for medium-term tax reform in the light of global developments and lessons from the latest taxation research. In addressing this issue, they review recent advances in both the theoretical and empirical tax literature and reform evidence from individual countries. Topics covered include the impact of taxes on economic performance; international and corporate taxation; personal tax and welfare systems; environmental taxation; and country-specific tax reform experiences.
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Chapter 4: Lessons from the Study of Taxes and the Behaviour of US Multinational Corporations

Rosanne Altshuler


4. Lessons from the study of taxes and the behavior of US multinational corporations Rosanne Altshuler* INTRODUCTION 4.1 Until recently, the richest datasets available for the study of how taxes affect the behavior of multinational corporations were those that provided information on the activities of US corporations. Both public and confidential data sources have allowed researchers to investigate how corporate taxes impact where US corporations invest, how that investment if financed, and how countries compete to attract US foreign direct investment among other topics. The availability of comprehensive data over a relatively long period of time has also allowed researchers to observe how the behavior of US firms has changed as globalization has intensified. This chapter reviews recent research on how the global activities of US multinational corporations respond to taxation. While the typical review tends to focus on contributions to the academic literature, the goal of this chapter is to focus on how the evidence gleaned from US data sources can help guide corporate tax reform.1 I draw seven lessons from the study of the activities of US multinational corporations. First, the real assets of US corporations are internationally mobile and the location of these assets has become more sensitive to differences in tax rates over time. Second, the evidence suggests that the same phenomena hold for intangible capital which is typically the source of a multinational’s competitive advantage abroad. Third, tax avoidance through income shifting seems to have gotten worse in recent years, at least for US multinationals....

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