On the relevance of double tax treaties

Petkova, Kunka and Stasio, Andrzej and Zagler, Martin ORCID: https://orcid.org/0000-0003-0863-7375 (2020) On the relevance of double tax treaties. International Tax and Public Finance, 27. pp. 575-605. ISSN 1573-6970

Available under License Creative Commons: Attribution 4.0 International (CC BY 4.0).

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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. We define tax distance as the cost of channelling corporate income from one country to another and, by considering treaty shopping through intermediate jurisdictions, we calculate the shortest (i.e. the cheapest) distance between any two countries. We show that relevant tax treaties-which reduce the direct tax distance both over domestic law and the entire existing treaty network-will increase FDI by about 18%.

Item Type: Article
Additional Information: We gratefully acknowledge financial support from the Austrian Science Fund (FWF) Grant W1235-G16, the OeNB Jubiläumsfonds Grant 17825 and financing from Università del Piemonte Orientale.
Keywords: Double tax treaties, FDI, Treaty Shopping, Tax treaty network
Classification Codes: JEL F21, F23, F53, H25, H26, H73, H87, K34
Divisions: Departments > Volkswirtschaft > Makroökonomie
Forschungsinstitute > Internationale Besteuerung
Version of the Document: Published
Depositing User: Martin Zagler
Date Deposited: 24 Sep 2019 11:43
Last Modified: 23 Jul 2020 11:08
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/92102/
URI: https://epub.wu.ac.at/id/eprint/7181


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