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The determinants of tax haven FDI

Chris Jones and Yama Temouri

Journal of World Business, 2016, vol. 51, issue 2, 237-250

Abstract: This paper examines the determinants of a multinational enterprise's (MNEs) decision to set up tax haven subsidiaries. We adapt the firm-specific advantage–country-specific advantage (FSA–CSA) framework and construct a number of empirically testable hypotheses. The analysis is based on a database covering 14,209 MNEs in twelve OECD countries. We find that the variety of capitalism of a MNEs home location and the level of technological intensity has a strong impact on this decision. We also find that the home country corporate tax rate has a minimal impact. This suggests that corporate tax liberalisation is unlikely to deter MNEs from undertaking this activity.

Keywords: Theory of FDI and the MNE; Corporate taxation; Probit regression; Tax havens; Varieties of capitalism (search for similar items in EconPapers)
Date: 2016
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