Publication Type
Working Paper
Publication Date
6-2018
Abstract
We undertake the first large-sample analysis of foreign tax holiday participation by U.S. firms. Tax holidays are temporary reductions of tax granted by governments, usually contingent on the firm making new operational investments in the country. We predict and find that firms are more likely to participate in foreign tax holidays if they are highly capital-intensive and have highly profitable foreign operations, and less likely to participate in foreign tax holidays if they are capital constrained and if the firm is headed by a short-term focused CEO. While foreign tax holidays reduce taxes on foreign income, we also find that during our sample period they increase the amount of U.S. tax on foreign income. Finally, we predict and find that firms participating in foreign tax holidays increase the amount of foreign earnings that they deem to be permanently reinvested for financial reporting purposes.
Keywords
Tax holiday, corporate tax, international tax
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
First Page
1
Last Page
60
Citation
CHOW, Travis K.; HOOPES, Jeffrey L.; and MAYDEW, Edward L..
U.S. Firms on Foreign (tax) Holidays. (2018). 1-60.
Available at: https://ink.library.smu.edu.sg/soa_research/1638
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://ssrn.com/abstract=3018819