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Foreign ownership and corporate income taxation : an empirical evaluation

  • Harry Huizinga
  • Gaëtan Nicodème

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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Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers 2008 - 2015 with number 185.

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Length: 50 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:euf:ecopap:0185
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