Where Does Multinational Investment Go with Territorial Taxation? Evidence from the United Kingdom

Li Liu

American Economic Journal: Economic Policy, 2020, vol. 12, issue 1, 325-58

Abstract: In 2009, the United Kingdom changed from a worldwide to a territorial tax system, abolishing dividend taxes on foreign repatriation from many low-tax countries. This paper assesses the causal effect of territorial taxation on real investments, using a unique dataset for multinational affiliates in 27 European countries and employing the difference-in-differences approach. It finds that the territorial reform has increased the investment rate of UK multinationals by 16.7 percentage points in low-tax countries. In the absence of any significant investment reduction elsewhere, the findings represent a likely increase in total outbound investment by UK multinationals.

JEL-codes: F23 G31 H25 H32 H87 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (12)

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DOI: 10.1257/pol.20180592

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