Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/163093
Authors: 
Hearson, Martin
Year of Publication: 
2017
Series/Report no.: 
WIDER Working Paper 2017/122
Abstract: 
Qualitative case studies suggest that the outcomes of tax treaty negotiations are determined by power politics and negotiating capability. In contrast, quantitative studies have tended to depart from a model that implies absolute gains, full rationality, and perfect information on the part of both treaty signatories. This paper bridges the gap by replicating two existing quantitative studies, introducing new, more sophisticated data. New fiscal data are drawn from the ICTD Government Revenue Dataset, while treaty content is measured using the ActionAid Tax Treaties Dataset. It finds that developing countries that raise more corporate income tax are more likely to sign tax treaties with wealthier countries, and more likely to negotiate higher withholding tax rates in those treaties, but not more likely to obtain a better negotiated result overall. In contrast, developing countries that raise more revenue in total are more likely to negotiate better outcomes in other clauses of the treaty that are more obscure and technically complex. There is also a strong learning effect, with better outcomes across the board as a developing country gains experience of signing tax treaties. Finally, greater asymmetries in investment stocks and material capabilities lead to worse outcomes for developing countries.
Subjects: 
developing countries
foreign direct investment
corporate taxation
double taxation treaties
multinational corporations
JEL: 
F53
H25
K34
O23
ISBN: 
978-92-9256-348-6
Document Type: 
Working Paper

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