Global organizations and taxes: An analysis of the dividend, interest, royalty, and management fee payments between U.S. multinationals' foreign affiliates

This study investigates the importance of multinational tax planning for global enterprises by examining cross-border payments of dividends, interest, royalties and compensation between commonly-owned foreign affiliates of U.S. multinationals. Using data from the multinationals' actual U.S. tax returns, we find dividends, royalties and sometimes interest are negatively correlated with the cumulative income and withholding taxes levied on cross-border transfers. We find no evidence that compensation payments are correlated with taxes. The findings are consistent with human capital contracts encountering more adverse non-tax considerations than equity, debt, and intangible property contracts.

[1]  David G. Harris.  The impact of U.S. tax law revision on multinational corporations' capital location and income shifting decisions , 1993 .

[2]  Mark A. Wolfson,et al.  GEOGRAPHIC INCOME SHIFTING BY MULTINATIONAL-CORPORATIONS IN RESPONSE TO TAX RATE CHANGES , 1993 .

[3]  J. Hines,et al.  Taxes, Technology Transfer, and the R&D Activities of Multinational Firms , 1994 .

[4]  M. Feldstein,et al.  The Effects of Taxation on Multinational Corporations , 1995 .

[5]  Alan C. Shapiro,et al.  Multinational Financial Management , 1984 .

[6]  J. Jacob.  Taxes and transfer pricing: Income shifting and the volume of intrafirm transfers , 1996 .

[7]  Rosanne Altshuler,et al.  Do Repatriation Taxes Matter? Evidence from the Tax Returns of U.S. Multinationals , 1994 .

[8]  R. Hubbard,et al.  Coming Home to America: Dividend Repatriations by U.S. Multinationals , 1989 .

[9]  Myron S. Scholes,et al.  Taxes and Business Strategy. , 1992 .

[10]  J. H. Collins,et al.  Foreign Tax Credit Limitations And Preferred Stock Issuances , 1992 .

[11]  R. Hubbard,et al.  The Role of Taxes in Location and Sourcing Decisions , 1993 .

[12]  David G. Harris,et al.  Income Shifting in U.S. Multinational Corporations , 1991 .

[13]  J. H. Collins,et al.  Cross-jurisdictional income shifting and earnings valuation , 1998 .

[14]  James R. Hines Jr..  Taxes, Technology Transfer, and the R&D Activities of Multinational Firms , 1994 .

[15]  J. Slemrod.  Taxation in the Global Economy , 1990 .

[16]  Rosanne Altshuler,et al.  The Effects of U.S. Tax Policy on the Income Repatriation Patterns of U.S. Multinational Corporations , 1991 .

[17]  R. Hubbard,et al.  Studies in International Taxation , 1993 .