Mutual Agreement Procedure and Foreign Direct Investments: Evidence from Firm-level Data

Matthias Petutschnig, Xixi Zhang*

*Corresponding author for this work

Publication: Working/Discussion PaperWU Working Paper

Abstract

This paper investigates the association between the effectiveness of mutual agreement procedures provided for in bilateral tax treaties (MAP) and foreign direct investments by analyzing MAP statistics and distinct MAP components. Using firm-level ownership data, we find that MNEs invest more frequently in countries with good MAP policy structures and qualities (e.g., MAP components and fast dispute resolution). Vertically integrated MNEs and small parent MNEs most favor countries with several effective MAP components. Overall, we provide novel evidence on MNEs’ investment responses to effective MAP, evidence that is crucial for policymakers who aim to reduce tax disputes and double taxation.
Original languageEnglish
DOIs
Publication statusPublished - 2 Oct 2023

Publication series

SeriesWU International Taxation Research Paper Series
Number2023-06

WU Working Paper Series

  • WU International Taxation Research Paper Series

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