Seminar: Bilateral tax treaties, treaty shopping and FDI flows

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Arjan Lejour (CPB)

Discussant: Hendrik Vrijburg (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject This paper examines the impact of bilateral tax treaties and other tax variables on bilateral FDI. First, it presents an econometric analysis of the effects of treaties on FDI based on a very rich database of all OECD countries from 1985 onwards. We conclude that new tax treaties increase bilateral FDI and that this effect increases over time, and peak at 25 percent after a decade or so. Moreover, the EU directives on mother daughter companies and interest and royalties have a significant positive impact on FDI. Second, we analyse the effects of treaty shopping on FDI. We develop various indicators measuring the size of treaty shopping based on simple arithmetic’s and sophisticated network analyses. In general these indicators have a significant impact on FDI: twenty extra tax treaties increase bilateral FDI stocks by about 40 percent in home and source countries.

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