Tax vs. Regulation Policy and the Location of Financial Sector FDI

34 Pages Posted: 6 Oct 2015

See all articles by Julia Merz

Julia Merz

University of Cologne

Michael Overesch

Universität zu Köln

Georg Wamser

University of Tuebingen; ETH Zurich

Date Written: September 21, 2015

Abstract

This paper analyzes how corporate taxation and regulatory requirements affect the location of financial sector FDI. We use novel information on new financial services entities established by multinational firms in 83 host countries. We find a negative effect of host country taxes on the probability of choosing a particular host location. We can also confirm a significant influence of the regulatory environment. For example, stricter (equity) capital requirements negatively affect location probabilities. Our empirical approach allows us to provide new insight in how a policy measure of a given country affects other countries by estimating cross-country tax and regulation elasticities.

Keywords: financial sector taxation, multinational banks, corporate taxation, mixed logit model

JEL Classification: F300, G210, G280, H870

Suggested Citation

Merz, Julia and Overesch, Michael and Wamser, Georg, Tax vs. Regulation Policy and the Location of Financial Sector FDI (September 21, 2015). CESifo Working Paper Series No. 5500. Available at SSRN: https://ssrn.com/abstract=2669368

Julia Merz

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Michael Overesch

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 (Contact Author)

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

ETH Zurich ( email )

Weinbergstr. 35
Zurich, 8003
Switzerland

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