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FDI Implications of Recent European Court of Justice Decision on Corporation Tax Matters

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  • Frank Barry and Rosemary Healy-Rae

Abstract

Corporation tax rates significantly influence the location of foreign direct investment (FDI) as well as company decisions on corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. While direct taxation remains within the competence of individual EU member states, the European Court of Justice (ECJ) has faced an increasing number of corporation-tax-related cases over recent years and its judgements have significantly redrawn the European tax landscape. The present paper reviews and synthesises these ECJ decisions and analyses their implications for the FDI decisions of Multinational Corporations.

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  • Frank Barry and Rosemary Healy-Rae, 2008. "FDI Implications of Recent European Court of Justice Decision on Corporation Tax Matters," The Institute for International Integration Studies Discussion Paper Series iiisdp270, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp270
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    1. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2006. "The demand for tax haven operations," Journal of Public Economics, Elsevier, vol. 90(3), pages 513-531, February.
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    5. 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.
    6. Grubert, Harry, 1998. "Taxes and the division of foreign operating income among royalties, interest, dividends and retained earnings," Journal of Public Economics, Elsevier, vol. 68(2), pages 269-290, May.
    7. 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.
    8. Reint Gropp & Kristina Kostial, 2000. "The Disappearing Tax Base; Is Foreign Direct Investment (FDI) Eroding Corporate Income Taxes?," IMF Working Papers 00/173, International Monetary Fund.
    9. Stephen Pavelin & Frank Barry, 2005. "The Single Market and the Geographical Diversification of Leading Firms in the EU," The Economic and Social Review, Economic and Social Studies, vol. 36(1), pages 1-17.
    10. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
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