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Using financial accounting data to examine the effect of foreign operations located in tax havens and other countries on U.S. multinational firms' Tax rates

Publication ,  Journal Article
Dyreng, SD; Lindsey, BP
Published in: Journal of Accounting Research
December 1, 2009

This paper investigates the effect tax havens and other foreign jurisdictions have on the income tax rates of multinational firms based in the United States. We develop a new regression methodology using financial accounting data to estimate the average worldwide, federal, and foreign tax rates on worldwide, federal, and foreign pretax book income for a large sample of U.S. firms with and without tax haven operations. We find that on average U.S. firms that disclosed material operations in at least one tax haven country have a worldwide tax burden on worldwide income that is approximately 1.5 percentage points lower than firms without operations in at least one tax haven country. Our results also show that U.S. firms face a 4.4% current federal tax rate on foreign income whether or not they have tax haven operations. Finally, we find that U.S. firms with operations in some tax haven countries have higher federal tax rates on foreign income than other firms. This result suggests that in some cases, tax haven operations may increase U.S. tax collections at the expense of foreign country tax collections.

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Published In

Journal of Accounting Research

DOI

EISSN

1475-679X

ISSN

0021-8456

Publication Date

December 1, 2009

Volume

47

Issue

5

Start / End Page

1283 / 1316

Related Subject Headings

  • Accounting
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1502 Banking, Finance and Investment
  • 1501 Accounting, Auditing and Accountability
 

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Dyreng, S. D., & Lindsey, B. P. (2009). Using financial accounting data to examine the effect of foreign operations located in tax havens and other countries on U.S. multinational firms' Tax rates. Journal of Accounting Research, 47(5), 1283–1316. https://doi.org/10.1111/j.1475-679X.2009.00346.x
Dyreng, S. D., and B. P. Lindsey. “Using financial accounting data to examine the effect of foreign operations located in tax havens and other countries on U.S. multinational firms' Tax rates.” Journal of Accounting Research 47, no. 5 (December 1, 2009): 1283–1316. https://doi.org/10.1111/j.1475-679X.2009.00346.x.
Dyreng, S. D., and B. P. Lindsey. “Using financial accounting data to examine the effect of foreign operations located in tax havens and other countries on U.S. multinational firms' Tax rates.” Journal of Accounting Research, vol. 47, no. 5, Dec. 2009, pp. 1283–316. Scopus, doi:10.1111/j.1475-679X.2009.00346.x.
Journal cover image

Published In

Journal of Accounting Research

DOI

EISSN

1475-679X

ISSN

0021-8456

Publication Date

December 1, 2009

Volume

47

Issue

5

Start / End Page

1283 / 1316

Related Subject Headings

  • Accounting
  • 3502 Banking, finance and investment
  • 3501 Accounting, auditing and accountability
  • 1502 Banking, Finance and Investment
  • 1501 Accounting, Auditing and Accountability