How Elastic is the Demand for Tax Havens? Evidence from the US Possessions Corporations Tax Credit
AbstractWhy do some firms adopt certain tax havens, and how sensitive is the demand for tax havens? We address these questions by studying how the repeal of section 936 tax credits affected firms with affiliates in Puerto Rico. We first describe the characteristics of US multinationals that were exposed to section 936. We then show that the market value of exposed firms decreased after losing access to section 936, implying that firms could not perfectly substitute to other tax havens. Finally, we find that firms exposed to section 936 did not respond by expanding their network of tax havens.
CitationGarrett, Daniel, and Juan Carlos Suárez Serrato. 2019. "How Elastic is the Demand for Tax Havens? Evidence from the US Possessions Corporations Tax Credit." AEA Papers and Proceedings, 109: 493-99. DOI: 10.1257/pandp.20191044
- F23 Multinational Firms; International Business
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- H32 Fiscal Policies and Behavior of Economic Agents: Firm