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Who Cares about Corporate Taxation? Asymmetric Tax Effects on Outbound FDI

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Author Info
Michael Overesch
Georg Wamser ()

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Abstract

This paper investigates whether different types of FDI are asymmetrically affected by corporate taxation. We classify investment projects according to several characteristics such as the general motivation for FDI, the type of business activity, or the degree of internationalization of the multinational. Subsequently, we analyze how local taxes influence the number of German outbound investments in European countries. The analysis reveals significant asymmetries with regard to tax effects: vertically integrated investments are more sensitive to host-country taxation than horizontal FDI; larger taxrate elasticities are estimated if business activities are considered highly mobile; in accordance with profit-shifting arguments, subsidiaries of more internationalized companies are less tax responsive to host taxation.

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Publisher Info
Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 59.

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Date of creation: 2008
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Handle: RePEc:ces:ifowps:_59

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Related research
Keywords: FDI; corporate taxation; multinational company; count data;

Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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    Other versions:
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  19. Harry Grubert & Joel Slemrod, 1994. "The Effect of Taxes on Investment and Income Shifting to Puerto Rico," NBER Working Papers 4869, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2009-11-28.

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