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Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria

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Author Info
Rainer Niemann ()
Corinna Treisch ()
Abstract

In 2005, Austria modified its group taxation regime and now provides an option for cross-border loss-offset. We analyse the combined impact of Austria's new group taxation and loss-offset limitations on cross-border investment decisions of domestic corporations. Monte Carlo simulations in an inter-temporal setting reveal that the impact on foreign real investment induced by the new group taxation is ambiguous. Whereas marginal investment projects with decreasing cash flows tend to benefit from group taxation, innovative projects with initial losses and increasing cash flows may be discriminated against. Investors should consider domestic income and repatriation policy simultaneously before opting for group taxation.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1506.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1506

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Related research
Keywords: group taxation; investment decisions; Monte Carlo simulations; international taxation; loss-offset rules;

Find related papers by JEL classification:
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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    Other versions:
  2. Roger H. Gordon & Joosung Jun & Joel Slemrod, 1993. "Taxes and the Form of Ownership of Foreign Corporate Equity," NBER Chapters, in: Studies in International Taxation, pages 13-46 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  3. Auerbach, Alan J, 1986. "The Dynamic Effects of Tax Law Asymmetries," Review of Economic Studies, Blackwell Publishing, vol. 53(2), pages 205-25, April. [Downloadable!] (restricted)
    Other versions:
  4. Altshuler, Rosanne & Auerbach, Alan J, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 61-86, February. [Downloadable!] (restricted)
    Other versions:
  5. Andrew B. Lyon & Gerald Silverstein, 1994. "The Alternative Minimum Tax and the Behavior of Multinational Corporations," NBER Working Papers 4783, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Rosanne Altshuler & Harry Grubert, 2002. "Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy," Departmental Working Papers 200009, Rutgers University, Department of Economics. [Downloadable!]
    Other versions:
  7. Lund,D., 2000. "Imperfect loss offset and the after-tax expected rate of return to equity, with an application to rent taxation," Memorandum 21/2000, Oslo University, Department of Economics. [Downloadable!]
  8. Saman Majd & Stewart C. Myers, 1987. "Tax Asymmetries and Corporate Tax Reform," NBER Chapters, in: The Effects of Taxation on Capital Accumulation, pages 343-376 National Bureau of Economic Research, Inc. [Downloadable!]
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  10. Saman Majd & Stewart C. Myers, 1985. "Valuing the Government's Tax Claim on Risky Corporate Assets," NBER Working Papers 1553, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Mackie-Mason, Jeffrey K., 1990. "Some nonlinear tax effects on asset values and investment decisions under uncertainty," Journal of Public Economics, Elsevier, vol. 42(3), pages 301-327, August. [Downloadable!] (restricted)
  12. Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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