Shaping Services Trade: The Heterogenous Effects of Withholding Taxes

Author: Ms. Li Liu, Mr. Alexander D Klemm, and Parijat Lal

Volume/Issue: Volume 2025 Issue 214

Publication date: October 2025

ISBN: 9798229029292

$20.00

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Topics covered in this book

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Exports and Imports , Economics- Macroeconomics , Public Finance , Taxation - General , Services Trade , Corporate Taxation , Withholding Taxes , Profit Shifting , services import , IMF working papers , service import , base-eroding payment , WHT rate , Withholding tax , Imports , Corporate income tax , Trade in services , Income tax systems , Global

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Summary

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.