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International Taxation and Multinational Firm Location Decisions

  • Salvador Barrios

    (European Commission)

  • Harry Huizinga


    (Tilburg University and CEPR)

  • Luc Laeven

    (International Monetary Fund and CEPR)

  • Gaëtan Nicodème

    (European Commission, CEB, CESifo and ECARES)

Using a large international firm-level data set, we estimate separate effects of host and parent country taxation on the location decisions of multinational firms. Both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries. In fact, the impact of parent country taxation is estimated to be relatively large, possibly reflecting its international discriminatory nature. For the cross-section of multinational firms, we find that parent firms tend to be located in countries with a relatively low taxation of foreign-source income. Overall, our results show that parent-country taxation – despite the general possibility of deferral of taxation until income repatriation – is instrumental in shaping the structure of multinational enterprise.

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Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0825.

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Date of creation: 2008
Date of revision:
Handle: RePEc:btx:wpaper:0825
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