We examine the effects of taxes on cross-border dividend, interest, royalty, and management fee payments between foreign affiliates of U.S. multinationals. Using 1990 tax return information on transfers totaling $22.8 billion and spanning 71 countries, we find dividend, royalty, and sometimes interest payments between foreign affiliates are negatively correlated with the net tax levied on cross-border transfers. We find no evidence management fees are structured to mitigate non-U.S. taxes. Thus, taxes affect the location of the supplier and the terms of the contracts for the provision of equity and intangible capital within the worldwide organization.
Journal of Accounting and Economics – Elsevier
Published: Dec 15, 1997
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