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Corporate Tax and Location Choice for Multinational Firms

Martina Lawless (), Daire McCoy (), Edgar Morgenroth () and Conor O'Toole ()

MPRA Paper from University Library of Munich, Germany

Abstract: The corporate tax rate and regime are policy instruments that are the subject of considerable attention for the role they play in attracting foreign multinationals making location decisions across countries. This paper examines the effects of corporate tax on these location decisions of newly established multinational subsidiaries across 26 European countries over an eight year period. We contribute to the existing literature by examining the effects of a non-linear response of firm location decisions to changes in the tax rate. We find that accounting for this non-linearity improves the performance of the model for all of the alternative measures of the tax rate. We also show that there are large variations in the sensitivity to tax rates across sectors and firm size groups. In particular, financial sector firms are more than twice as sensitive to changes in corporation tax rates relative to other sectors.

Keywords: Corporation Tax; Location Choice; Multinational firms; FDI (search for similar items in EconPapers)
JEL-codes: C25 F23 H25 (search for similar items in EconPapers)
Date: 2015-06-03
New Economics Papers: this item is included in nep-acc, nep-bec, nep-int, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
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Journal Article: Corporate tax and location choice for multinational firms (2018) Downloads
Working Paper: Corporate tax and location choice for multinational firms (2018) Downloads
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