Events

Prof. Heather Berry
Dean’s Professor of Strategy and International Business
McDonough School of Business
Georgetown University

This seminar examines the intrafirm services trade of multinational corporations (MNCs) for their intangible assets, separating intellectual property (IP) and professional services, and analyzing transfers to subsidiaries in different types of tax haven countries (including so-called traditional (ie, Caribbean Island) and modern (ie, the Netherlands or Ireland) tax haven countries).  After merging two confidential datasets from the Bureau of Economic Analysis (BEA) on the population of US MNCs, we explore how transfers of the intangible assets of US MNCs shifted after the US Tax Cuts and Jobs Act (TCJA). Difference in difference results show that parent IP imports (parent payments to their foreign subsidiaries for the use of IP) declined significantly from traditional tax havens while there was no similar decline in parent IP imports from modern tax haven countries.  At the same time, parent professional service exports increased significantly to subsidiaries in both traditional and modern tax havens.  These results suggest that although US MNCs moved their IP out of traditional island tax havens back to the US in the face of decreasing tax differentials, IP flows with subsidiaries in modern tax havens were unaffected by the tax change, likely reflecting the broader set of business activities MNCs perform in these locations.  The results further show that MNCs with higher intra-firm product flows were more likely to have increased professional services flows with their subsidiaries in both traditional and modern tax havens.