DETERMINANTS OF CORPORATE TAX PLANNING STRATEGIES AMONG MULTINATIONAL CORPORATIONS IN THE UNITED ARAB EMIRATES

Abstract

Multinational corporations possess greater opportunities for tax avoidance than purely domestic firms due to their global scale, operational complexity, and ability to exploit regulatory mismatches. This study examines the determinants of corporate tax planning strategies in the context of the UAE’s newly implemented federal corporate tax regime. Using effective tax rates as the proxy for tax avoidance, the analysis is based on a sample of 89 multinational corporations for the financial year ending 2024. Firm-level variables, including company size, profitability, foreign operations, capital intensity, and leverage, were tested using panel least squares regression. The findings reveal that, on average, multinational corporations in the UAE reported an effective tax rate of 9.84 percent, slightly higher than the statutory rate of 9 percent, explaining limited evidence of aggressive avoidance in the first year of enforcement. Regression results demonstrate that all firm-level variables are significant determinants of effective tax rates, though their effects deviate from traditional expectations. Larger and more profitable firms were associated with higher effective tax rates, consistent with political cost theory and the limited scope for deductions under the UAE regime. Foreign operations, capital intensity, and leverage also exhibited positive relationships with effective tax rates, reflecting restrictions on interest deductibility and the absence of generous capital allowances. These results highlight that while multinational corporations in the UAE are not yet aggressively minimizing taxes, structural characteristics strongly shape their tax burdens. The study contributes to the literature by offering timely insights into corporate tax behavior in a low-tax jurisdiction and underscores the need for continuous monitoring and balanced policies to ensure compliance, revenue mobilization, and competitiveness as the tax framework matures.