The role of multinational taxation in the first reversal of foreign direct investment flows in the euro area

Virginia Di Nino and Andrejs Semjonovs

Economic Bulletin Boxes, 2020, vol. 2

Abstract: The US corporate tax reform that entered into force at the beginning of 2018 resulted in foreign direct investment flows reversing for the first time in the euro area. The episode is explained fully by developments in countries which are financial centres, where disinvestment operations were carried out via special purpose entities, initially through transactions in equities and later also in debt securities. Besides the bilateral flows with the United States, which were the first to be affected, foreign direct investment flows to and from offshore centres also reversed, reflecting the complex geographical structure of capital allocation by US multinational enterprises. JEL Classification: F32, F38

Keywords: financial centres; Foreign direct investment; multinationals; profit shifting practices; special purpose entities (search for similar items in EconPapers)
Date: 2020-03
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