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Foreign ownership and corporate income taxation: An empirical evaluation

  • Huizinga, Harry
  • Nicodeme, Gaetan

Economic integration in Europe has not led to a ‘race to the bottom’ regarding corporate income taxes. This paper documents trends in the foreign ownership of companies in Europe and it examines whether foreign ownership has exerted a positive influence on corporate income tax levels. Using company-level data, we document that the foreign ownership share in Europe stood at around 21.5 percent in the year 2000. The estimation suggests that a one percentage point increase in foreign ownership increases the average corporate income tax rate between a half and one percent. Further international economic integration is likely to lead to higher foreign ownership shares with a concomitant positive influence on corporate taxation levels.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 50 (2006)
Issue (Month): 5 (July)
Pages: 1223-1244

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Handle: RePEc:eee:eecrev:v:50:y:2006:i:5:p:1223-1244
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