Journal article
Beyond Borders: Uncertainty in Supragovernmental Tax Enforcement and Corporate Investment
The Accounting review, Vol.97(6), pp.233-261
10/01/2022
DOI: 10.2308/TAR-2021-0050
Abstract
Amid growing globalization, many countries have offered tax incentives to attract corporate investment. Prior research studies the role such incentives play in firms' location and investment choices. However, we have limited evidence regarding the role that uncertainty about the intensity of future tax enforcement plays in those decisions. In 2013, the European Commission (E.C.) abruptly began investigating the tax-ruling practices of several countries in response to allegations that certain firms received preferential tax treatment (``state aid cases''). We use this setting to study the economic consequences of increased uncertainty about future tax enforcement. We find evidence consistent with significant reductions in U.S. multinational enterprises' subsidiary investments within, firm input purchases from, and aggregate investment of U.S. firms flowing to targeted state aid countries. Specifically, for U.S. multinational enterprises' subsidiary investments, we find fixed assets declined by 1.7 percent of total assets, or $7.6 million per subsidiary.
Details
- Title: Subtitle
- Beyond Borders: Uncertainty in Supragovernmental Tax Enforcement and Corporate Investment
- Creators
- Zackery D. Fox - Brigham Young UniversityMartin Jacob - WHU – Otto Beisheim School of ManagementJaron H. Wilde - United States UniversityRyan J. Wilson - University of Iowa
- Resource Type
- Journal article
- Publication Details
- The Accounting review, Vol.97(6), pp.233-261
- Publisher
- Amer Accounting Assoc
- DOI
- 10.2308/TAR-2021-0050
- ISSN
- 0001-4826
- eISSN
- 1558-7967
- Number of pages
- 29
- Grant note
- Arthur Anderson Fellowship 403041268 - TRR 266 / German Research Foundation (Deutsche Forschungsgemeinschaft); German Research Foundation (DFG)
- Language
- English
- Date published
- 10/01/2022
- Academic Unit
- Accounting
- Record Identifier
- 9984380394102771
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