Tax‐Avoidance Activities of U.S. Multinational Corporations*
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No Canadian affiliation. An affiliation-only frame — the usual design — would never have seen this work. It is one of the works that make the case for inverting the frame.
Abstract
Abstract This paper investigates whether economies of scale exist for tax planning. In particular, do larger, more profitable, multinational corporations avoid more taxes than other firms, resulting in lower effective tax rates? While the empirical results indicate that, ceteris paribus, larger corporations have higher effective tax rates, firms with greater pre‐tax income have lower effective tax rates. The negative relation between effective tax rates (ETRs) and pretax income is consistent with firms with greater pre‐tax income having more incentives and resources to engage in tax planning. Consistent with multinational corporations being able to avoid income taxes that domestic‐only companies cannot, I find that multinational corporations in general, and multinational corporations with more extensive foreign operations, have lower worldwide ETRs than other firms. Finally, in a sample of multinational corporations only, I find that higher levels of U.S. pre‐tax income are associated with lower U.S. and foreign ETRs, while higher levels of foreign pre‐tax income are associated with higher U.S. and foreign ETRs. Thus, large amounts of foreign income are associated with higher corporate tax burdens. Overall, I find substantial evidence of economies of scale to tax planning.
Fetched live from OpenAlex and de-inverted. Abstracts are not stored in this database: the inverted indexes are 8.6 GB of the frame’s 9.3 GB of text, and the host has 13 GB free.
The record
- Venue
- Contemporary Accounting Research
- Topic
- Corporate Taxation and Avoidance
- Field
- Business, Management and Accounting
- Canadian institutions
- —
- Funders
- —
- Keywords
- Multinational corporationCeteris paribusCorporate taxBusinessTax planningIncentiveTax avoidanceMonetary economicsIncome taxEconomicsDouble taxationLabour economicsPublic economicsMarket economyFinanceMicroeconomics
- Has abstract in OpenAlex
- yes