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International Taxation and Multinational Firm Location Decisions

  • Salvador Barrios

    ()

    (European Commission)

  • Luc Laeven

    ()

    (International Monetary Fund)

  • Harry Huizinga

    ()

    (Tilburg University)

  • Gaetan Nicodeme

    ()

    (European Commission)

Using a large international firm-level data set, we estimate separate effects of host and parent country taxation on the location decisions of multinational firms. Both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries. In fact, the impact of parent country taxation is estimated to be relatively large, possibly reflecting its international discriminatory nature. For the cross-section of multinational firms, we find that parent firms tend to be located in countries with a relatively low taxation of foreign-source income. Overall, our results show that parent-country taxation ? despite the general possibility of deferral of taxation until income repatriation ? is instrumental in shaping the structure of multinational enterprise.

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File URL: http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_16_en.pdf
File Function: final version, 2009
Download Restriction: no

Paper provided by Directorate General Taxation and Customs Union, European Commission in its series Taxation Papers with number 16.

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Length: 46 pages
Date of creation: Apr 2009
Date of revision: Apr 2009
Publication status: Published in Journal of Public Economics, 2012, 96(11), pp. 946-958
Handle: RePEc:tax:taxpap:0016
Contact details of provider: Web page: http://ec.europa.eu/taxation_customs/index_en.htm
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