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The Taxation of Multinationals: Firm Level Evidence for Belgium

  • Hylke Vandenbussche
  • Chang Tan

This paper provides empirical evidence of a more favorable tax treatment for foreign multinationals compared to similar domestic Firms in a small open economy. Using treatment effects to control for self-selection of foreign firms into low tax firms, we find that foreign multinationals have substantially lower effective tax rates compared to domestic firms. In our estimations we also control for firm size, sector membership and business-cycle effects. A simple theoretical framework is used to explain our empirical findings and rests on the notion that multinational firms are in a better position to bargain for lower taxes with governments as a result of their "footloose" nature and outside location options.

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File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp160.pdf
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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 16005.

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Length: 23 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:lic:licosd:16005
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Web page: http://www.econ.kuleuven.be/licos
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  1. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  2. Nicodeme, Gaetan, 2001. "Computing effective corporate tax rates: comparisons and results," MPRA Paper 3808, University Library of Munich, Germany.
  3. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
  4. Zimmerman, Jerold L., 1983. "Taxes and firm size," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 119-149, April.
  5. Rachel Griffith & Stephen Redding & Helen Simpson, 2004. "Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab," LSE Research Online Documents on Economics 3699, London School of Economics and Political Science, LSE Library.
  6. Boudewijn Janssen, 2005. "Corporate Effective Tax Rates in the Netherlands," De Economist, Springer, vol. 153(1), pages 47-66, December.
  7. Huizinga, H.P. & Nielsen, S.B., 1997. "Capital income and profit taxation with foreign ownership of firms," Other publications TiSEM b4f6a916-7f7f-4fe1-9cf0-c, Tilburg University, School of Economics and Management.
  8. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  9. Harry Huizinga & Gaëtan Nicodème, 2003. "Foreign ownership and corporate income taxation : an empirical evaluation," European Economy - Economic Papers 185, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  10. Julie Collins & Douglas Shackelford, 1995. "Corporate domicile and average effective tax rates: The cases of Canada, Japan, the United Kingdom, and the United States," International Tax and Public Finance, Springer, vol. 2(1), pages 55-83, February.
  11. repec:ner:tilbur:urn:nbn:nl:ui:12-73857 is not listed on IDEAS
  12. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September.
  13. Kind, Hans Jarle & Schjelderup, Guttorm & Ulltveit-Moe, Karen-Helene, 2001. "Corporate Taxation, Multinational Enterprise and Economic Integration," CEPR Discussion Papers 2753, C.E.P.R. Discussion Papers.
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