مالیات جهانی و ادغام و مالکیت داخلی
Abstract
1- Introduction
2- Comments on the broader question, related literature, and this study
3- Comments on research design and empirical results
4- Other comments
5- Conclusion
References
Abstract
Harris and O'Brien (2018) investigate whether U.S. tax policy distorts U.S. multinationals’ (MNCs) investment. They find that MNCs facing higher repatriation tax costs engage in fewer domestic acquisitions. The study re-examines the results in two prior studies that found no effect (Hanlon et al. 2015) and a positive effect (Martin et al. 2015) by introducing a new proxy for repatriation tax costs: A binary variable for whether the MNC uses the Double Irish structure. We critique the theory underlying the prediction as well as the proxy. We conclude that caution should be exercised in taking the results at face value.
Introduction
This study by Harris and O’Brien (2018) examines whether the U.S. worldwide tax system affects domestic investment. 2 More specifically, Harris and O’Brien identify a U.S. multinational firm-initiated repatriation tax increasing event, namely, the establishment and use of a Double Irish structure (hereafter DI), and link DI to domestic mergers and acquisitions (hereafter M&A).3 Because firms adopt DI in different years, the setting can be viewed as a difference-in-differences design with treatment events staggered over time. The authors find that, firms that establish DI experience a decrease in domestic M&A relative to non-DI users. The authors conclude that their evidence is consistent with the worldwide taxation system impeding domestic investment. Harris and O’Brien start by arguing that theoretically we should expect a negative association between repatriation taxes and domestic M&A. Prior studies (Hanlon et al. 2015 and Martin et al. 2015) do not find such a negative relation using a widely accepted repatriation tax proxy, REPAT. The authors attribute the lack of result to the fact that REPAT is confounded by foreign growth. The authors propose DoubleIrish as a “cleaner” measure of repatriation tax rate and argue that it is less likely to be confounded by foreign growth compared to REPAT. The new DoubleIrish measure is the key motivation and innovation of the paper. The authors first validate that the establishment of DI is indeed correlated with increased repatriation tax rates. Next, they show that DoubleIrish is negatively associated with domestic M&A volume and value. The authors also compare and contrast DoubleIrish with REPAT and explain why results differ using the two measures. In Section 2, we begin our discussion with an overview of the broad research question and related literature. We next critique the theory underlying the study’s main prediction. Then we discuss whether it is reasonable to attribute the lack of a negative relation between repatriation taxes and domestic M&A to proxies used. We also discuss and compare DoubleIrish and REPAT in more details in Section 3. Finally, because of concerns about the construct validity of the DoubleIrish proxy, we caution the reader not to take the results at face value.