Productive and Unproductive Reactions of MNEs to International Tax Differentials

25 Pages Posted: 3 Jun 2015

See all articles by Sebastian Beer

Sebastian Beer

Oesterreichische Nationalbank (OeNB); Vienna University of Economics and Business - Department of Economics

Date Written: May 2015

Abstract

I provide initial evidence that international taxation impacts the magnitude of R&D investments in the UK. Relying on a simple theoretical model, I show that the observed response is consistent with the mispricing of intra-group transactions. My structural estimates suggest that transfer prices for internally provided innovation increase by around three percent in response to a one percentage point increase in foreign taxation. This response is more pronounced than previous estimates of aggregate profi t shifting indicate, supporting concerns on the susceptibility of intangible assets to facilitate profi t relocation.

Suggested Citation

Beer, Sebastian, Productive and Unproductive Reactions of MNEs to International Tax Differentials (May 2015). WU International Taxation Research Paper Series No. 2015 - 19. Available at SSRN: https://ssrn.com/abstract=2610616 or http://dx.doi.org/10.2139/ssrn.2610616

Sebastian Beer (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3
1090 Vienna
Austria

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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