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Effects of Corporate Taxation and Bilateral Tax Treaties on European Multinationals’ Investment, 2005-2009. A Multi-Country Analysis

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  • Mário MARQUES
  • Carlos PINHO

Abstract

This paper analyzes the effects of corporate tax rates and tax treaties on multinationals foreign activity. First, it examines whether host country corporate tax rate and tax treaties influence the probability of a multinational to choose a particular country to locate a new foreign subsidiary. Second, it evaluates to what extent the investment level is determined by taxation. We use data of new foreign subsidiaries located in Europe and take a two-step estimation. The estimated semi-elasticity of effective tax rate is of -1.516. At the intensive margin of investment findings indicate significant effects of both tax treaties and corporate tax rates on the number of employees.

Suggested Citation

  • Mário MARQUES & Carlos PINHO, 2014. "Effects of Corporate Taxation and Bilateral Tax Treaties on European Multinationals’ Investment, 2005-2009. A Multi-Country Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(1), pages 33-44.
    • Handle: RePEc:eaa:aeinde:v:14:y:2014:i:1_3
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    More about this item

    Keywords

    foreign investment; corporate taxation; tax treaties;
    All these keywords.

    JEL classification:

    • 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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