How do corporate tax hikes affect investment allocation within multinationals?
This article studies how corporate tax hikes transmit across countries through multinationals’ internal networks of subsidiaries. We build a parsimonious multicountry model to highlight two opposing spillover effects: while tax competition between countries generates positive investment spillover, i...
| Autores: | , |
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| Tipo de recurso: | artículo |
| Fecha de publicación: | 2025 |
| País: | España |
| Institución: | Universidad de Navarra |
| Repositorio: | Dadun. Depósito Académico Digital de la Universidad de Navarra |
| Idioma: | inglés |
| OAI Identifier: | oai:dadun.unav.edu:10171/116571 |
| Acceso en línea: | https://hdl.handle.net/10171/116571 |
| Access Level: | acceso abierto |
| Palabra clave: | Tax hike Investment Internal networks Multinationals Spillover effects |
| Sumario: | This article studies how corporate tax hikes transmit across countries through multinationals’ internal networks of subsidiaries. We build a parsimonious multicountry model to highlight two opposing spillover effects: while tax competition between countries generates positive investment spillover, intra-firm production linkages predict negative spillover. Using subsidiary-level data and exogenous corporate tax hikes, we find that local business units cut investment by 0.5 percent for a 1 percent increase in foreign corporate tax. This result highlights the importance of production linkages in propagating foreign tax shocks, as the supply-chain-induced negative spillover dominates the positive spillover effect suggested by the conventional wisdom of tax competition. |
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