Global Ripple Effects of Corporate Tax Reforms

We study international spillovers of corporate tax reforms in a fragmented global tax regime.Using firm-level evidence on the 2017 U.S. Tax Cuts and Jobs Act (TCJA) and a quantitative generalequilibrium model, we illustrate how multinational enterprises (MNEs) propagate local policy shocks throughout the global economy.Our framework emphasizes two key intrinsic properties of intangible capital: non-rivalry and mobile ownership.We find the TCJA generated positive outward spillovers: First, it boosted U.S. MNEs' intangible investment, raising their foreign subsidiaries' output.Second, it increased tangible investment of foreign MNEs' U.S. subsidiaries, incentivizing them to expand intangible investment at home.Conversely, a Global Minimum Tax (GMT) implemented by the rest of the world generates negative inward spillovers for the United States, even if U.S.-parented MNEs are exempt.These findings illustrate that there is no such thing as a purely domestic corporate tax policy.