IMF Working Papers

International Tax Spillovers and Tangible Investment, with Implications for the Global Minimum Tax

By Michael Keen, Li Liu, Hayley Pallan

August 4, 2023

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Format: Chicago

Michael Keen, Li Liu, and Hayley Pallan. International Tax Spillovers and Tangible Investment, with Implications for the Global Minimum Tax, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper articulates and, using newly-assembled data, explores how international taxation affects aggregate tangible cross-border investment. Spillovers from statutory tax rates abroad seem: As sizable as effects from the host’s rate; larger than previous consensus values (attributed to a systematic bias from FDI data); and consistent with ‘implicit’ profit shifting through real investment (rather than ‘paper’ profit shifting). Contrary to much policy discussion, the results also imply that: Host countries’ marginal effective tax rates have at best a weak effect on real investment; those elsewhere have none; and, applied to the prospective global minimum tax, inward tangible investment in most sample countries will increase.

Subject: Balance of payments, Capital account, Corporate income tax, Foreign direct investment, International tax issues, Marginal effective tax rate, Tax policy, Taxes

Keywords: Affiliate investment, Capital account, Corporate income tax, Corporate tax tax rate, Corporate Taxation, Cross-border investment, FDI data, Foreign Direct Investment, Global, Host country, International Tax, International tax issues, Investment impact, Marginal effective tax rate, Multinational Investment

Publication Details

  • Pages:

    80

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2023/159

  • Stock No:

    WPIEA2023159

  • ISBN:

    9798400248719

  • ISSN:

    1018-5941

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