The Cost and Benefits of Tax Treaties with Investment Hubs: Findings from Sub-Saharan Africa (IMF Working Paper)

Link: https://www.imf.org/en/Publications/WP/Issues/2018/10/24/The-Cost-and-B…

Abstract: 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.