Tax Spillovers in Cross-Border Real Investment: Evidence from a New Dataset on Multinationals

This paper investigates the nature and extent of cross-border spillovers on real investment, using a newly assembled dataset on real investment in physical capital by foreign affiliates of multinationals. It articulates the channels through which such effects can arise, finding strong spillovers through statutory rates in a form that is consistent with implicit profit shifting associated with real commercial decisions. Contrary to much policy discussion, there is little evidence of cross-border effects though traditionally-defined marginal effective tax rates. Applying these results, preliminary simulations of the real investment effects of a global minimum tax are reported.