Implications of the US Tax Reform for Transatlantic FDI

Friedrich Heinemann, Marcel Olbert (), Olena Pfeiffer (), Thomas Schwab, Christoph Spengel () and Kathrin Stutzenberger ()
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Marcel Olbert: University of Mannheim
Olena Pfeiffer: Centre for European Economic Research (ZEW)
Christoph Spengel: Centre for European Economic Research (ZEW)
Kathrin Stutzenberger: University of Mannheim

Intereconomics: Review of European Economic Policy, 2018, vol. 53, issue 2, 87-93

Abstract: Abstract On 22 December 2017 President Trump signed the Tax Cuts and Jobs Act. This corporate tax reform can be considered the most significant amendment of the US corporate tax code since 1986. Besides the reduction of the corporate income tax rate from 35% to 21%, the Tax Cuts and Jobs Act entails features like a switch from worldwide income taxation to territorial taxation, as well as immediate deductions for certain assets. This leads to a substantial improvement for the US in global tax competition. In this paper, we analyse the effects of the US tax reform on FDI flows between Europe and the US. We find that European high-tax countries in particular will suffer from a net outflow of FDI.

Date: 2018
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DOI: 10.1007/s10272-018-0727-6

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