The Cost and Benefits of Tax Treaties with Investment Hubs: Findings from Sub-Saharan Africa

Author/Editor:

Sebastian Beer ; Jan Loeprick

Publication Date:

October 24, 2018

Electronic Access:

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Summary:

This paper investigates the costs and benefits of concluding double tax treaties with investment hubs. Based on a sample of 41 African economies from 1985–2015, the results suggest that signing treaties with investment hubs is not associated with additional investments; yet, these treaties tend to come with nonnegligible revenue losses. Building on a theoretical model, the paper investigates the role of treaty shopping in driving nominal investment flows and provides indirect evidence for its importance in the sample