Details
| Originalsprache | Englisch |
|---|---|
| Seiten (von - bis) | 299-327 |
| Seitenumfang | 29 |
| Fachzeitschrift | Accounting Review |
| Jahrgang | 98 |
| Ausgabenummer | 2 |
| Publikationsstatus | Veröffentlicht - März 2023 |
| Extern publiziert | Ja |
Abstract
We examine the effect of compliance frictions in reclaiming foreign withholding tax overpayments on foreign portfolio investment (FPI) using data on bilateral FPI around the globe and U.S. institutional investors' foreign holdings. Exploiting variation in withholding tax overpayments for 36 investor countries and 110 issuer countries, we find that withholding tax overpayments adversely affect FPI because of the high compliance costs to international investors in claiming foreign tax credits. Cross-sectional tests further show that the adverse effect of withholding tax overpayments on FPI is reduced when compliance costs in claiming these overpayments from foreign countries are lower. Our results indicate that eliminating most of the compliance costs in the reclaim process by implementing a relief at the source mechanism could increase FPI by about 7.6 percent.
ASJC Scopus Sachgebiete
- Betriebswirtschaft, Management und Rechnungswesen (insg.)
- Bilanzierung
- Volkswirtschaftslehre, Ökonometrie und Finanzen (insg.)
- Finanzwesen
- Volkswirtschaftslehre, Ökonometrie und Finanzen (insg.)
- Volkswirtschaftslehre und Ökonometrie
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in: Accounting Review, Jahrgang 98, Nr. 2, 03.2023, S. 299-327.
Publikation: Beitrag in Fachzeitschrift › Artikel › Forschung › Peer-Review
}
TY - JOUR
T1 - Withholding Taxes, Compliance Cost, and Foreign Portfolio Investment
AU - Jacob, Martin
AU - Todtenhaupt, Maximilian
PY - 2023/3
Y1 - 2023/3
N2 - We examine the effect of compliance frictions in reclaiming foreign withholding tax overpayments on foreign portfolio investment (FPI) using data on bilateral FPI around the globe and U.S. institutional investors' foreign holdings. Exploiting variation in withholding tax overpayments for 36 investor countries and 110 issuer countries, we find that withholding tax overpayments adversely affect FPI because of the high compliance costs to international investors in claiming foreign tax credits. Cross-sectional tests further show that the adverse effect of withholding tax overpayments on FPI is reduced when compliance costs in claiming these overpayments from foreign countries are lower. Our results indicate that eliminating most of the compliance costs in the reclaim process by implementing a relief at the source mechanism could increase FPI by about 7.6 percent.
AB - We examine the effect of compliance frictions in reclaiming foreign withholding tax overpayments on foreign portfolio investment (FPI) using data on bilateral FPI around the globe and U.S. institutional investors' foreign holdings. Exploiting variation in withholding tax overpayments for 36 investor countries and 110 issuer countries, we find that withholding tax overpayments adversely affect FPI because of the high compliance costs to international investors in claiming foreign tax credits. Cross-sectional tests further show that the adverse effect of withholding tax overpayments on FPI is reduced when compliance costs in claiming these overpayments from foreign countries are lower. Our results indicate that eliminating most of the compliance costs in the reclaim process by implementing a relief at the source mechanism could increase FPI by about 7.6 percent.
KW - compliance cost
KW - dividend taxation
KW - foreign portfolio investment
KW - withholding taxes
UR - http://www.scopus.com/inward/record.url?scp=85175461661&partnerID=8YFLogxK
U2 - 10.2308/TAR-2020-0721
DO - 10.2308/TAR-2020-0721
M3 - Article
AN - SCOPUS:85175461661
VL - 98
SP - 299
EP - 327
JO - Accounting Review
JF - Accounting Review
SN - 0001-4826
IS - 2
ER -