Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements
() and Martin Zagler
Abstract: Out of a total of 2,976 double tax agreements (DTAs), some
60% are signed between a developing and a developed economy. As DTAs shift
taxing rights from capital importing to capital exporting countries, the
prior would incur a loss. We demonstrate in a theoretical model that in a
deal one country does not trump the other, but that the deal must be
mutually beneficial. In the case of an asymmetric DTA, this requires
compensation from the capital exporting country to the capital importing
country. We provide empirical evidence that such compensation is indeed
paid, for instance in the form of bilateral official development
assistance, which increases on average by six million US$ in the year of
the signature of a DTA.
Keywords: developing countries, foreign aid, double taxation agreements; (follow links to similar papers)
JEL-Codes: K33,; F53,; H25,; H87,; D82; (follow links to similar papers)
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