The Taxation of Multinationals: Firm Level Evidence for Belgium

LICOS Discussion Paper No. 160/2005

23 Pages Posted: 16 Dec 2005

See all articles by Hylke Vandenbussche

Hylke Vandenbussche

Catholic University of Leuven (KUL), CEPR

Chang Tan

Catholic University of Leuven (KUL)

Date Written: September 19, 2005

Abstract

This paper provides empirical evidence of a more favorable tax treatment for foreign multinationals compared to similar domestic firms in a small open economy. Using treatment effects to control for self-selection of foreign firms into low tax firms, we find that foreign multinationals have substantially lower effective tax rates compared to domestic firms. In our estimations we also control for firm size, sector membership and business-cycle effects. A simple theoretical framework is used to explain our empirical findings and rests on the notion that multinational firms are in a better position to bargain for lower taxes with governments as a result of their "footloose" nature and outside location options.

Keywords: Firm level data, Multinationals, Corporate taxation, Self-selection

JEL Classification: C51, E62, F23

Suggested Citation

Vandenbussche, Hylke and Tan, Chang, The Taxation of Multinationals: Firm Level Evidence for Belgium (September 19, 2005). LICOS Discussion Paper No. 160/2005, Available at SSRN: https://ssrn.com/abstract=870236 or http://dx.doi.org/10.2139/ssrn.870236

Hylke Vandenbussche (Contact Author)

Catholic University of Leuven (KUL), CEPR ( email )

Faculty of Economics
Naamsestraat 69
B-3000 Leuven, 3000
Belgium
+32 16 326 920 (Phone)
+32 16 326 732 (Fax)

HOME PAGE: https://www.sites.google.com/site/vandenbusschehylke/home-1

Chang Tan

Catholic University of Leuven (KUL) ( email )

Leuven, B-3000
Belgium

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