Their actions imply that tax rate differences across countries significantly affect capital allocation within firms depressing investment levels in high tax jurisdictions and introducing differences tween the productivity of capital deploy in different locations. Key concepts include This paper examines the extent to which taxation influences trade crit practices by affecting returns to investment.
Analysis of detail foreign affiliate
Level data suggests that tax effects are large and statistically significant in explaining trade crit choices. Affiliates in low tax jurisdictions have higher net working capital positions than do other affiliates. Managers have incentives to set accounts receivable and accounts payable in a manner that reallocates capital from lightly tax operations where investment Indonesia Phone Number List opportunities have dissipat to highly tax operations where profitable opportunities remain. capital positions or the difference tween accounts receivable and accounts payable should higher for firms facing lower tax rates. Author Abstract This paper analyzes the extent to which firms use trade crit to reallocate capital in response to tax incentives. Tax induc differences in pretax returns encourage the use of trade crit to reallocate capital from firms facing low tax rates to those facing high tax rates. Evidence from the worldwide operations of.
US multinational firms indicates
That affiliates in low tax jurisdictions use trade crit to lend whereas those in high tax jurisdictions use trade crit to borrow percent lower local tax rates are associat with net trade crit positions that are . percent higher as a fraction of sales. The use of trade crit Iran Phone Number to get capital out of low tax low return environments is also illustrat by reactions of US firms to the temporary repatriation tax holiday in when affiliates with positive net trade crit positions were significantly more likely than others to repatriate dividends to parent companies in the Unit States.