Shaping Services Trade

This paper investigates the effects of withholding taxes on cross-border trade in services, using a newly compiled dataset covering the universe of bilateral service imports and withholding tax rates from 2005 to 2021. Employing a theoretical framework that highlights the role of withholding taxes in curbing base-eroding payments, the empirical analysis reveals significant effects, with estimated semi-elasticities of 4 for royalties, 1 for technical fees, and 1 for total service import.