Globalization and U.S. corporate tax policies: evidence from import competition
This paper studies how globalization affects the corporate tax policies of U.S. manufacturing firms. Using U.S.-granting China Permanent Normal Trade Relations as a quasi-natural experiment, we find a significant increase in tax reduction activities for firms facing higher exposure to Chinese import...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2023
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/164063 |
| _version_ | 1826116167586021376 |
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| author | Chen, Tao Lin, Chen Shao, Xiang |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Chen, Tao Lin, Chen Shao, Xiang |
| author_sort | Chen, Tao |
| collection | NTU |
| description | This paper studies how globalization affects the corporate tax policies of U.S. manufacturing firms. Using U.S.-granting China Permanent Normal Trade Relations as a quasi-natural experiment, we find a significant increase in tax reduction activities for firms facing higher exposure to Chinese imports. The effect is more pronounced for firms with higher managerial slack. We also find that the effect is stronger for firms in less diversified products market and faster changing industries. We also show that U.S. firms facing higher Chinese import competition are more likely to engage in other tax-motivated activities: acquisition of subsidiaries in low-tax regions and suspected transfer pricing. Furthermore, we explore the 2017 tax cut and the recent U.S.-China trade dispute and find that firms engage less in tax reduction activities after the 2017 tax cut and after the tariff increase for Chinese imports. |
| first_indexed | 2024-10-01T04:06:55Z |
| format | Journal Article |
| id | ntu-10356/164063 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T04:06:55Z |
| publishDate | 2023 |
| record_format | dspace |
| spelling | ntu-10356/1640632023-05-19T07:31:18Z Globalization and U.S. corporate tax policies: evidence from import competition Chen, Tao Lin, Chen Shao, Xiang Nanyang Business School Business::Finance Globalization Tax Planning This paper studies how globalization affects the corporate tax policies of U.S. manufacturing firms. Using U.S.-granting China Permanent Normal Trade Relations as a quasi-natural experiment, we find a significant increase in tax reduction activities for firms facing higher exposure to Chinese imports. The effect is more pronounced for firms with higher managerial slack. We also find that the effect is stronger for firms in less diversified products market and faster changing industries. We also show that U.S. firms facing higher Chinese import competition are more likely to engage in other tax-motivated activities: acquisition of subsidiaries in low-tax regions and suspected transfer pricing. Furthermore, we explore the 2017 tax cut and the recent U.S.-China trade dispute and find that firms engage less in tax reduction activities after the 2017 tax cut and after the tariff increase for Chinese imports. Ministry of Education (MOE) Nanyang Technological University The authors gratefully acknowledge the financial support from the Research Grants Council of Hong Kong [Project T35-710/20-R], Nanyang Technological University [Project M4081437.010], the Singapore Ministry of Education Academic Research Fund [No. RG166/18], National Natural Science Foundation of China [Grants 71772078 and 71972089], Shanghai Pujiang Talent Program [Grant 13PJC009], and The Fudan-Latin America University Consortium[Grant FLAUCIDEALABMXPE2005]. 2023-01-04T01:30:34Z 2023-01-04T01:30:34Z 2022 Journal Article Chen, T., Lin, C. & Shao, X. (2022). Globalization and U.S. corporate tax policies: evidence from import competition. Management Science, 68(8), 6145-6162. https://dx.doi.org/10.1287/mnsc.2021.4121 0025-1909 https://hdl.handle.net/10356/164063 10.1287/mnsc.2021.4121 2-s2.0-85137869137 8 68 6145 6162 en M4081437.010 RG166/18 Management Science © 2021 INFORMS. All rights reserved. |
| spellingShingle | Business::Finance Globalization Tax Planning Chen, Tao Lin, Chen Shao, Xiang Globalization and U.S. corporate tax policies: evidence from import competition |
| title | Globalization and U.S. corporate tax policies: evidence from import competition |
| title_full | Globalization and U.S. corporate tax policies: evidence from import competition |
| title_fullStr | Globalization and U.S. corporate tax policies: evidence from import competition |
| title_full_unstemmed | Globalization and U.S. corporate tax policies: evidence from import competition |
| title_short | Globalization and U.S. corporate tax policies: evidence from import competition |
| title_sort | globalization and u s corporate tax policies evidence from import competition |
| topic | Business::Finance Globalization Tax Planning |
| url | https://hdl.handle.net/10356/164063 |
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