Preprint
The Effect of U.S. Tax Reform on U.S. R&D-Intensive Multinational Companies
SSRN Electronic Journal
2023
DOI: 10.2139/ssrn.4468276
Abstract
The U.S. tax reform in 2017 introduced the Global Intangible Low-Taxed Income (GILTI) tax to discourage U.S. multinational companies (MNCs) from shifting intangible income offshore. The reform simultaneously introduced the Foreign Derived Intangible Income (FDII) tax incentive to encourage companies to locate intangible income derived from export sales in the United States. We examine whether and how these two tax provisions affect the investment decisions of U.S. R&D-intensive MNCs. We find that these MNCs increase foreign tangible investments to minimize their GILTI tax burden but do not appear to decrease domestic tangible investments. To maximize FDII tax benefits, MNCs increase investments in both foreign and domestic human capital. We find MNCs are more likely to increase foreign human capital when they have more cross-border collaboration experience, consistent with the prediction that firms increase foreign R&D to better adapt home-developed technology for foreign markets. We further show that FDII incentivizes MNCs to cultivate a new R&D workforce in the U.S., as opposed to merely recruiting seasoned R&D personnel from other firms. Our findings have timely implications for policymakers to assess the impact of the 2017 tax reform.
Details
- Title: Subtitle
- The Effect of U.S. Tax Reform on U.S. R&D-Intensive Multinational Companies
- Creators
- Jing Huang - Virginia TechBenjamin Osswald - University of Illinois Urbana-ChampaignRyan J. Wilson
- Resource Type
- Preprint
- Publication Details
- SSRN Electronic Journal
- DOI
- 10.2139/ssrn.4468276
- ISSN
- 1556-5068
- eISSN
- 1556-5068
- Language
- English
- Date posted
- 2023
- Academic Unit
- Accounting
- Record Identifier
- 9984444761502771
Metrics
3 Record Views