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Location Choice and Tax Responsiveness of Foreign Multinationals: Evidence from Asean Countries

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  • Athiphat Muthitacharoen

Abstract

This study uses a firm-level dataset to examine the impacts of taxation on multinationals' decisions to set up new foreign subsidiaries in developing ASEAN countries. It finds that while taxes play a critical role in MNEs' location choice decision, there is an important heterogeneity in the tax responsiveness. First, the tax sensitivity for high-tech firms is significantly lower than that for low-tech firms. Second, having a prior presence in the respective host country is associated with substantially lower tax responsiveness. Finally, in accordance with international-tax-avoidance considerations, the tax responsiveness is significantly diminished for affiliates with a connection to tax-haven countries.

Suggested Citation

  • Athiphat Muthitacharoen, 2018. "Location Choice and Tax Responsiveness of Foreign Multinationals: Evidence from Asean Countries," PIER Discussion Papers 95, Puey Ungphakorn Institute for Economic Research, revised Jul 2022.
    • Handle: RePEc:pui:dpaper:95
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    More about this item

    Keywords

    Tax incentive; FDI; Multinational firms; Developing countries;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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