'Tax deferral' and shareholding structure of multinational firms

• Ano de defesa: 2018
• Autor(a) principal: Galilea, Gisele Walczak
• Orientador(a): Arvate, Paulo Roberto
• Tipo de documento: Tese
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Palavras-chave em Português: Diferimento de impostos; Localização do investimento; Inversão corporativa
• Palavras-chave em Inglês: Tax deferral; Investment location; Corporate inversion
• Link de acesso: https://hdl.handle.net/10438/25679

While firms are looking for tax savings through the choice of investment projects (i.e., through investments in new foreign subsidiaries in countries with the lowest tax rate), countries are aware that firms are sensitive to tax factors and thus adopt instruments such as tax deferral to prevent the 'flight' of capital. However, by discouraging repatriation, this tax instrument promotes 'multinationals' flight' (i.e., the corporate inversion of multinationals). This paper demonstrates that instruments such as tax deferral accelerate the process of 'multinational flight of the home country'. Using both a reduced form analysis and a dynamic structural model, we find that multinationals in countries with a worldwide system of taxation and tax deferral have a greater incentive to avoid residual taxation of foreign earnings in the home country and therefore repatriate less than half of their foreign earnings. In turn, this 'nonrepatriation' increased the probability of relocation by 4.4%.