Who Cares About Corporate Taxation? Asymmetric Tax Effects on Outbound FDI

28 Pages Posted: 15 Dec 2009

See all articles by Michael Overesch

Michael Overesch

Universität zu Köln

Georg Wamser

University of Tuebingen; ETH Zurich

Abstract

This paper investigates whether different types of FDI are asymmetrically affected by corporate taxation. We classify investment projects according to several characteristics such as the general motivation for FDI, the type of business activity, or the degree of internationalisation of the multinational firm. Subsequently, we analyse how local taxes influence the number of German outbound investments in European countries. The analysis reveals significant asymmetries with regard to tax effects: vertically integrated investments are more sensitive to host-country taxation than horizontal FDI; larger tax rate elasticities are estimated if business activities are considered highly mobile; and in accordance with profit-shifting considerations, subsidiaries of more internationalised companies are less tax responsive to host-country taxation.

Suggested Citation

Overesch, Michael and Wamser, Georg, Who Cares About Corporate Taxation? Asymmetric Tax Effects on Outbound FDI. World Economy, Vol. 32, Issue 12, pp. 1657-1684, December 2009. Available at SSRN: https://ssrn.com/abstract=1521266 or http://dx.doi.org/10.1111/j.1467-9701.2009.01174.x

Michael Overesch (Contact Author)

Universität zu Köln ( email )

Albertus-Magnus-Platz
WiSo-Gebäude
Cologne, 50923
Germany
0221/470-5605 (Phone)

HOME PAGE: http://www.steuer.uni-koeln.de/

Georg Wamser

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

ETH Zurich ( email )

Weinbergstr. 35
Zurich, 8003
Switzerland

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