Foreign (in)direct investment and corporate taxation

Georg Wamser

No 2008,15, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank, Research Centre

Abstract: This paper investigates the role of corporate taxation with respect to a multinational's investment decision, in which the multinational can pursue either a direct or an indirect investment strategy. The latter involves at least three corporate entities and opens up enhanced opportunities for international tax planning. The existence of preferential tax treatment for conduit or intermediate corporate entities presumably changes the role of corporate taxation in destination countries, because it supports multinationals in avoiding taxes. The empirical findings of this study are consistent with theoretical predictions and suggest that tax effects differ, depending on the investment regime. The endogeneity of the structural choice - direct versus indirect - is taken into account by a switching regression approach. --

Keywords: multinational company; business taxes; firm-level data; switching regression (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:bubdp1:7555

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