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The international corporate tax system is considered a network. Just like for transportation, “shortest” paths are computed, which minimize tax payments for multinational enterprises when they repatriate profits. We include corporate income tax rates, withholding taxes on dividends, double tax treaties, and double taxation relief methods. We find that treaty shopping leads to an average potential reduction of the tax burden on repatriated dividends of about 6% points. An indicator for centrality in the tax network identifies the UK, Luxembourg, and the Netherlands as the most important conduit countries. Low-tax havens do not have a crucial role in reducing dividend repatriation taxes. By contrast, tax haven financial centres do. In the regressions we find that the centrality measures are robustly significant explanatory variables for bilateral FDI stocks. This also holds for our treaty shopping indicator.

The increasing importance of global supply chains has prompted the use of analytical tools based on trade in value added, because traditional trade measures (in gross value) cannot track the origin and destination of value added produced in different countries. This paper follows a recently created methodological framework for analyzing trade in value added, but extends it to identify the spokes and hubs in these global supply chains. In particular, we create indicators that measure the origin of value added which is redirected by hubs and the destinations of redirected value added. Using these indicators and the GTAP database for 2001, 2004 and 2007 we identify the importance of redirected value added and the hub and spoke relationships at the industry level.