The Effects of Repatriation Taxes on FDI:Evidence from OECD Multinationals

This study empirically investigates whether the tax differentials between home and host countries differently affect multinationals' foreign investment and profit shifting decisions under contrasting international tax systems. In particular,we compare these differential tax effects between credit and exemption systems, using firm-level data on selected OECD countries. Based on the presented analysis, we find that tax differentials affect multinationals' foreign investment decisions to a larger degree under the exemption system than under the credit system when a home country's tax rate is larger than that in the host country.By contrast, our results show that the tax effects on profit shifting are similar under both these systems.