The True Art of the Tax Deal: Evidence on Aid Flows and Bilateral Double Tax Agreements

Julia Braun, Martin Zagler

Publication: Working/Discussion Paper


Out of a total of 2,976 double tax agreements (DTAs), some 60% are signed between a developing and a developed economy. As DTAs shift taxing rights from capital importing to capital exporting countries, the prior would incur a loss. We demonstrate in a theoretical model that in a deal one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA, this requires compensation from the capital exporting country to the capital importing country. We provide empirical evidence that such compensation is indeed paid, for instance in the form of bilateral official development assistance, which increases on average by six million US$ in the year of the signature of a DTA.
Original languageEnglish
Publication statusPublished - 2017

Publication series

NameZEW - Centre for European Economic Research Discussion Paper

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502010 Public finance
  • 502046 Economic policy
  • 502047 Economic theory

Cite this