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The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements

Braun, Julia and Zagler, Martin (2017) The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements. Department of Economics Working Paper Series, 242. WU Vienna University of Economics and Business, Vienna.

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Out of a total of 2,976 double tax agreements (DTAs), some 60% are signed between a developing and a developed economy. As DTAs shift taxing rights from capital importing to capital exporting countries, the prior would incur a loss. We demonstrate in a theoretical model that in a deal one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA, this requires compensation from the capital exporting country to the capital importing country. We provide empirical evidence that such compensation is indeed paid, for instance in the form of bilateral official development assistance, which increases on average by six million US$ in the year of the signature of a DTA.

Item Type: Paper
Keywords: developing countries, foreign aid, double taxation agreements
Classification Codes: JEL K33, F53, H25, H87, D82
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 14 Mar 2017 10:53
Last Modified: 14 Mar 2017 10:53
URI: http://epub.wu.ac.at/id/eprint/5459


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