IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Corporate Taxation and Multinational Activity

Listed author(s):
  • Peter Egger
  • Simon Loretz
  • Michael Pfaffermayr
  • Hannes Winner

This paper assesses the impact of corporate taxation on multinational activity. A numerically solvable general equilibrium model of trade and multinational firms is used to incorporate the following components of corporate taxation: parent and host country statutory corporate tax rates, withholding tax rates, and parent and host country depreciation allowances. We account for their differential impact under alternative methods of double taxation relief (i.e., credit, exemption, and deduction). The hypotheses regarding the effects of changes in the tax parameters are investigated in a panel of bilateral OECD outbound stocks of foreign direct investment (FDI) from 1991 to 2002. For this, we compile annual information on taxation to construct the largest existing panel of tax parameters at the bilateral level based on national tax law and bilateral tax treaties. Our findings indicate that the parent country's statutory corporate tax rate tends to foster outward FDI, whereas the host country's statutory corporate and withholding tax rates are negatively associated with outward FDI. Depreciation allowances exert a significant impact on FDI, as hypothesized.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-08/cesifo1_wp1773.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1773.

as
in new window

Length:
Date of creation: 2006
Handle: RePEc:ces:ceswps:_1773
Contact details of provider: Postal:
Poschingerstrasse 5, 81679 Munich

Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  2. Janeba, Eckhard, 1992. "Corporate income tax competition, double taxation treaties, and foreign direct investment," Discussion Papers, Series II 194, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  3. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
  4. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
  5. Gene M. Grossman & Elhanan Helpman & Adam Szeidl, 2003. "Optimal Integration Strategies for the Multinational Firm," NBER Working Papers 10189, National Bureau of Economic Research, Inc.
  6. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-683, November.
  7. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
  8. Henrik Braconier & Pehr-Johan Norbäck & Dieter Urban, 2005. "Reconciling the Evidence on the Knowledge-capital Model," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 770-786, 09.
  9. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  10. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2002. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," NBER Working Papers 8929, National Bureau of Economic Research, Inc.
  11. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahreche-Révil, 2005. "How Does FDI React to Corporate Taxation?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00270515, HAL.
  12. Bruce A. Blonigen & Ronald B. Davies & Helen T. Naughton & Glen R. Waddell, 2005. "Spacey Parents: Spatial Autoregressive Patterns in Inbound FDI," NBER Working Papers 11466, National Bureau of Economic Research, Inc.
  13. Deborah L. Swenson, 2000. "Transaction Type and the Effect of Taxes on the Distribution of Foreign Direct Investment in the United States," NBER Chapters, in: International Taxation and Multinational Activity, pages 89-112 National Bureau of Economic Research, Inc.
  14. Derek K. Kellenberg, 2007. "The Provision Of Public Inputs And Foreign Direct Investment," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 170-184, 04.
  15. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
  16. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  17. Michael P Devereux, 2007. "The Impact of Taxation on the Location of Capital, Firms and Profit: a Survey of Empirical Evidence," Working Papers 0702, Oxford University Centre for Business Taxation.
  18. Michael P. Devereux & R. Glenn Hubbard, 2000. "Taxing Multinationals," NBER Working Papers 7920, National Bureau of Economic Research, Inc.
  19. Hines, James R. Jr., 1999. "Lessons From Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(2), pages 305-322, June.
  20. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  21. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  22. Joel Slemrod, 1989. "Tax Effects on Foreign Direct Investment in the United States: Evidence from a Cross-Country Comparison," NBER Working Papers 3042, National Bureau of Economic Research, Inc.
  23. Michael Devereux & Rachel Griffith, 1998. "The taxation of discrete investment choices," IFS Working Papers W98/16, Institute for Fiscal Studies.
  24. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 107-126, March.
  25. Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
  26. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
  27. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2007. "Export-Platform Foreign Direct Investment," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 776-795, 06.
  28. Bond, E.W. & Samuelson, L., 1988. "Strategic Behavior And The Rules For International Taxation Of Capital," Papers 3-88-10, Pennsylvania State - Department of Economics.
  29. James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
  30. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
  31. David L. Carr & James R. Markusen & Keith E. Maskus, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Reply," American Economic Review, American Economic Association, vol. 93(3), pages 995-1001, June.
  32. Swenson, Deborah L., 1994. "The impact of U.S. tax reform on foreign direct investment in the United States," Journal of Public Economics, Elsevier, vol. 54(2), pages 243-266, June.
  33. Mutti, John & Grubert, Harry, 2004. "Empirical asymmetries in foreign direct investment and taxation," Journal of International Economics, Elsevier, vol. 62(2), pages 337-358, March.
  34. Ruud A. de Mooij & Sjef Ederveen, 2001. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," CESifo Working Paper Series 588, CESifo Group Munich.
  35. Assaf Razin & Yona Rubinstein & Efraim Sadka, 2005. "Corporate Taxation and Bilateral FDI with Threshold Barriers," NBER Working Papers 11196, National Bureau of Economic Research, Inc.
  36. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
  37. Sinn, H.W., 1990. "Taxation And The Birth Of Foreign Subsidiaries," Papers 66, Princeton, Woodrow Wilson School - Discussion Paper.
  38. James R. Markusen & Keith E. Maskus, 1999. "Discriminating Among Alternative Theories of the Multinational Enterprise," NBER Working Papers 7164, National Bureau of Economic Research, Inc.
  39. Michael Devereux & Harold Freeman, 1995. "The impact of tax on foreign direct investment: Empirical evidence and the implications for tax integration schemes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(1), pages 85-106, February.
  40. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-293, May.
  41. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers W96/14, Institute for Fiscal Studies.
  42. Scholes, Myron S & Wolfson, Mark A, 1990. "The Effects of Changes in Tax Laws on Corporate Reorganization Activity," The Journal of Business, University of Chicago Press, vol. 63(1), pages 141-164, January.
  43. James R. Hines, Jr. & Eric M. Rice, 1990. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers 3477, National Bureau of Economic Research, Inc.
  44. 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.
  45. Bruce A. Blonigen, 2005. "The Effects of," World Bank Economic Review, World Bank Group, vol. 19(3), pages 407-424.
  46. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-1094, December.
  47. Rosanne Altshuler & Harry Grubert & T. Scott Newlon, 2000. "Has U.S. Investment Abroad Become More Sensitive to Tax Rates?," NBER Chapters, in: International Taxation and Multinational Activity, pages 9-38 National Bureau of Economic Research, Inc.
  48. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  49. Ronald B. Davies, 2004. "Tax Treaties and Foreign Direct Investment: Potential versus Performance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(6), pages 775-802, November.
  50. Shah, Anwar & Slemrod, Joel, 1991. "Do Taxes Matter for Foreign Direct Investment?," World Bank Economic Review, World Bank Group, vol. 5(3), pages 473-491, September.
  51. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2002. "How important are capital and total factor productivity for economic growth?," FRB Atlanta Working Paper 2002-2, Federal Reserve Bank of Atlanta.
  52. Jason G. Cummins & R. Glenn Hubbard, 1994. "The Tax Sensitivity of Foreign Direct Investment: Evidence from Firm-Level Panel Data," NBER Working Papers 4703, National Bureau of Economic Research, Inc.
  53. Grubert, Harry & Mutti, John, 2000. "Do Taxes Influence Where U.S. Corporations Invest?," National Tax Journal, National Tax Association, vol. 53(4), pages 825-840, December.
  54. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  55. Slemrod, J., 1989. "Tax Effects Of Foreign Direct Investment In The U.S.: Evidence From A Cross-Country Comparison," Working Papers 254, Research Seminar in International Economics, University of Michigan.
  56. Assaf Razin & Joel Slemrod, 1990. "Taxation in the Global Economy," NBER Books, National Bureau of Economic Research, Inc, number razi90-1, September.
  57. repec:ntj:journl:v:53:y:2000:i:n._4:p:825-40 is not listed on IDEAS
  58. repec:ntj:journl:v:52:y:1999:i:n._2:p:305-22 is not listed on IDEAS
  59. Hartman, David G., 1985. "Tax policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 26(1), pages 107-121, February.
  60. Ronald B. Davies, 2003. "The OECD Model Tax Treaty: Tax Competition And Two-Way Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 725-753, 05.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1773. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.