The Tax Attractiveness of EU Locations for Corporate Investments: A Stocktaking of Past Developments and Recent Reforms

Gundert Hannah (), Nicolay Katharina (), Steinbrenner Daniela () and Sophia Wickel
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Gundert Hannah: ZEW Mannheim, Mannheim, Germany
Nicolay Katharina: ZEW Mannheim, Mannheim, Germany
Steinbrenner Daniela: ZEW Mannheim, Mannheim, Germany

The Economists' Voice, 2024, vol. 21, issue 1, 97-132

Abstract: In this paper, we illustrate the tax attractiveness of EU countries as investment locations over time in terms of effective average tax rates and evaluate potential tax reform options. Our quantitative assessment of recent tax policies suggests that corporate tax rate cuts, notional interest deductions and R&D incentives significantly reduce the effective average tax rate. When government budgets are constrained, however, tax incentives with a direct link to investment activities, such as accelerated depreciation and R&D incentives, are most suitable to stimulate private investment. Even after the introduction of the global minimum tax, these measures remain a viable tool to stimulate investments.

Keywords: effective tax rates; Devereux/Griffith methodology; global minimum tax; tax incentives; investment; location attractiveness (search for similar items in EconPapers)
JEL-codes: F21 F23 H25 K34 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/ev-2023-0066

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