Keywords

Delaware, tax haven, corporate governance, corporate tax avoidance

Abstract

We examine whether Delaware is a domestic tax haven. We find that taxes play an economically important role in determining whether U.S. firms locate subsidiaries in Delaware and that a Delaware-based state tax avoidance strategy lowers state effective tax rates by between 0.7 and 1.1 percentage points, on average. The tax savings represent a 15–24% decrease in the state income tax burden and translate to an increase in net income of 1.04–1.47%. However, we find that the tax benefits of Delaware tax strategies are diminishing over time in response to initiatives by state governments to limit multistate tax avoidance.

Original Publication Citation

“Exploring the Role that Delaware Plays as a Domestic Tax Haven” Journal of Financial Economics (2013) 108:751-772. (with Scott Dyreng and Bradley Lindsey).

Document Type

Peer-Reviewed Article

Publication Date

2013

Publisher

Journal of Financial Economics

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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