Zeitschrift der Academy of Accounting and Financial Studies

1528-2635

Abstrakt

What Drives Emerging Economies Firms to Invest In Tax Havens?

Yosra Makni Fourati, Rafika MADHI, Ahmad Alqatan

This study aims to examine the incentives of multinational enterprises (MNEs) for setting up tax -haven subsidiaries. Based on the firm-specific advantage–country-specific advantage (FSA–CSA) framework, we have conducted our research hypotheses. Using a sample of 165 MNEs from six emerging countries spanning the years 2014-2016, we document that firms with greater investments in intangible assets have a higher likelihood of owning subsidiaries in tax havens. Concerning the home-country specific advantages, we provide evidence that firms are more likely to set up tax-haven subsidiaries when their home country has lower required book-tax conformity and a worldwide-tax system. With respect to the host-country advantages, we show that the lowest corporate-tax rate usually offered by tax havens constitutes a motivation for foreign MNEs to establish tax-haven subsidiaries. In summary, our findings indicate that firm's home-country tax system characteristics (a worldwide tax system, book-tax conformity) are seen as the most critical determinants for setting up tax- haven subsidiaries.