GEP Seminar: Martina Magli (Ludwig-Maximilians Universiity)

 Title:  Corporate taxation and cross-border trade in the global economy

 Abstract: This paper investigates the impact of corporate tax rates (CTR) on international services trade, focusing on firm heterogeneity and tax differentials beyond tax havens. Leveraging exogenous variations in CTRs across countries, we estimate the semi-elasticity of services trade for both multinational enterprises (MNEs) and non-MNEs. The findings reveal that firms increase imports and decrease exports in response to lower CTRs in partner countries. Notably, non-MNEs exhibit a pronounced decrease in exports, while MNEs adjust their trade flows asymmetrically, increasing trade with low-tax partners and decreasing trade with high-tax partners. These results highlight the dual role of CTR changes in driving profit-shifting behaviour and real economic activity. Decomposition analysis suggests that while competitive effects dominate at higher partner-country CTRs, changes in trade flows reflect a blend of economic activity and profit-shifting dynamics. This research offers new insights into the interplay between corporate taxation and global trade in services, with implications for both tax policy and international trade regulation.