Tax avoidance activities of United States multinational corporations

This dissertation examines which characteristics distinguish firms that avoid more income taxation from firms that avoid less income taxation. Specifically, I examine whether firms with greater income, sales, and more extensive foreign operations avoid more income tax per dollar of income than firms with less income, sales, and less extensive foreign operations. First, I develop a model of corporate income tax avoidance that predicts that the net benefits of tax avoidance are increasing in firm economic scale and scope. Second, the empirical analysis examines the validity of the model's predictions. In particular, do firms with higher income, greater sales, and more extensive foreign operations avoid more income tax, resulting in lower effective tax rates?; I find that firms with greater income have lower worldwide, U.S., and foreign ETRs. This negative relationship is consistent with corporations with greater income, in general, avoiding more tax per dollar of income than corporations with less income do. In addition, I find that multinational corporations with greater income avoid substantially more income taxation their U.S. domestic-only counterparts. Thus, multinational corporations, in particular, take advantage of the tax planning opportunities available to them.; Contrary to the model's predictions, I find significantly positive relationships between worldwide ETRs and firm size and between worldwide ETRs and the extent of foreign operations. Thus, not all assumptions and predictions of the model of tax avoidance hold true in the empirical tests. Large firms pay more tax per dollar of income than small firms do, regardless of whether a firm is multinational or U.S. domestic-only.; Finns with more extensive foreign operations also have higher worldwide ETRs. This is not surprising since statutory tax rates around the world are commonly higher than the U.S. statutory tax rate. However, for the sub-sample of multinational corporations, I find a significantly negative relationship between the extent of foreign operations and foreign ETRs. This result is consistent with multinationals achieving economies of scale in regards to foreign tax planning, as they expand their operations overseas.