Working Paper: NBER ID: w25516
Authors: Daniel G. Garrett; Juan Carlos Suárez Serrato
Abstract: Why do some firms adopt certain tax havens and how sensitive is the demand for tax havens? We address these questions by studying how the repeal of Section 936 tax credits affected firms with affiliates in Puerto Rico. We first describe the characteristics of US multinationals that were exposed to Section 936. We then show that the market value of exposed firms decreased after losing access to Section 936, implying that firms could not perfectly substitute to other tax havens. Finally, we find that firms exposed to Section 936 did not respond by expanding their network of tax havens.
Keywords: No keywords provided
JEL Codes: F21; F23; H25; H26; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm characteristics (size, R&D investment) (L25) | larger declines in firm value (G32) |
| repeal of section 936 tax credits (H26) | lack of substitutability between tax havens (H26) |
| decline in firm value (G33) | demand for tax havens is not perfectly elastic (H32) |
| repeal of section 936 tax credits (H26) | decline in firm value (G33) |