GLOBAL ORGANIZATIONS AND TAXES - AN ANALYSIS OF THE DIVIDEND, INTEREST, ROYALTY, AND MANAGEMENT FEE PAYMENTS BETWEEN US MULTINATIONALS FOREIGN AFFILIATES

We examine the effects of taxes on cross-border dividend, interest, ro yalty, and management fee payments between foreign affiliates of U.S, multinationals. Using 1990 tax return information on transfers totalin g $22.8 billion and spanning 71 countries, we find dividend, royalty, and sometimes interest payments between foreign affiliates are negativ ely correlated with the net tax levied on cross-border transfers. We f ind no evidence management fees are structured to mitigate non-U.S. ta xes. Thus, taxes affect the location of the supplier and the terms of the contracts for the provision of equity and intangible capital withi n the worldwide organization. (C) 1998 Elsevier Science B.V. All right s reserved.