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Relocation of headquarters and international taxation

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  • Voget, Johannes
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    Abstract

    About 6% of multinationals relocated their headquarters to another country in the 1997-2007 period. This paper presents empirical evidence on the role of taxes in these relocation decisions. It considers a sample of 140 multinationals that relocated their headquarters over the past decade and compares them to a control group of 1943 multinationals that did not relocate. It is found that the additional tax due in the home country upon repatriation of foreign profits has a positive effect on the probability of relocation. The empirical results suggest that an increase in the repatriation tax by 10 percentage points would raise the share of relocating multinationals by 2.2 percentage points, equivalent to an increase in the number of relocations by more than one third. Furthermore, the presence of controlled foreign corporation legislation also has a positive effect on the number of relocations.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 9-10 (October)
    Pages: 1067-1081

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    Handle: RePEc:eee:pubeco:v:95:y:2011:i:9-10:p:1067-1081

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: International taxation Location of headquarters Controlled foreign corporation Corporate inversion Multinational corporations;

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    Cited by:
    1. repec:wsr:ecbook:2010:i:iv-002 is not listed on IDEAS
    2. Wiji Arulampalam & Michael P. Devereux & Federica Liberini, 2012. "Taxes and the Location of Targets," Working Papers 1213, Oxford University Centre for Business Taxation.
    3. Bauer, Christian J. & Langenmayr, Dominika, 2013. "Sorting into outsourcing: Are profits taxed at a gorilla's arm's length?," Journal of International Economics, Elsevier, vol. 90(2), pages 326-336.
    4. Huizinga, Harry & Voget, Johannes & Wagner, Wolf, 2012. "Who bears the burden of international taxation? Evidence from cross-border M&As," Journal of International Economics, Elsevier, vol. 88(1), pages 186-197.
    5. Federica Liberini, 2014. "Corporate Taxes and the Growth of the Firm," KOF Working papers 14-354, KOF Swiss Economic Institute, ETH Zurich.
    6. Martin Falk, 2012. "Determinants of Greenfield Investment in Knowledge Intensive Business Services," FIW Research Reports series IV-002, FIW.
    7. Harry Grubert & Rosanne Altshuler, 2013. "Fixing the System: An Analysis of Alternative Proposals for the Reform of International Tax," Departmental Working Papers 201305, Rutgers University, Department of Economics.
    8. Liberini, Federica, 2014. "Corporate Taxes and the Growth of the Firm," The Warwick Economics Research Paper Series (TWERPS) 1042, University of Warwick, Department of Economics.
    9. Schanz, Deborah & Feller, Anna, 2014. "Wieso Deutschland (fast) keine BEPS-Bekämpfung braucht," arqus Discussion Papers in Quantitative Tax Research 171, arqus - Arbeitskreis Quantitative Steuerlehre.

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