The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight

Chris Jones; Yama Temouri; Ali Ahmed

The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight

Chris Jones
, Yama Temouri
, Ali Ahmed

Research output: Contribution to journal › Article › peer-review

16 Citations (SciVal)

20 Downloads (Pure)

Abstract

The use of tax havens by multinationals is a pervasive activity in international
business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens
and has important policy implications at both the domestic and the international
level.

Original language	English
Pages (from-to)	1-30
Number of pages	30
Journal	Transnational Corporations
Volume	27
Issue number	2
Publication status	Published - 31 Aug 2020

Bibliographical note

Transnational Corporations has the copyright for all published articles. Authors may
reuse published manuscripts with due acknowledgement.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 10 Reduced Inequalities

Keywords

capital flight, economic development, institutions, tax havens, wealth extraction

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The relationship between MNE tax haven use
Transnational Corporations has the copyright for all published articles. Authors may reuse published manuscripts with due acknowledgement.
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Cite this

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title = "The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight",

abstract = "The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens and has important policy implications at both the domestic and the international level.",

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AU - Jones, Chris

AU - Temouri, Yama

AU - Ahmed, Ali

N1 - Transnational Corporations has the copyright for all published articles. Authors may reuse published manuscripts with due acknowledgement.

PY - 2020/8/31

Y1 - 2020/8/31

N2 - The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens and has important policy implications at both the domestic and the international level.

AB - The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens and has important policy implications at both the domestic and the international level.

KW - capital flight, economic development, institutions, tax havens, wealth extraction

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The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight

Abstract

Bibliographical note

UN SDGs

Keywords

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