Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria

Niemann, Rainer; Treisch, Corinna

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Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria

CESifo Working Paper Series No. 1506

27 Pages Posted: 8 Aug 2005

See all articles by Rainer Niemann

Rainer Niemann

University of Graz, Center for Accounting Research; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Corinna Treisch

University of Duisburg-Essen - Dept. of Economics

There are 2 versions of this paper

Date Written: July 2005

Abstract

In 2005, Austria modified its group taxation regime and now provides an option for crossborder loss-offset. We analyse the combined impact of Austria's new group taxation and loss-offset limitations on cross-border investment decisions of domestic corporations. Monte Carlo simulations in an inter-temporal setting reveal that the impact on foreign real investment induced by the new group taxation is ambiguous. Whereas marginal investment projects with decreasing cash flows tend to benefit from group taxation, innovative projects with initial losses and increasing cash flows may be discriminated against. Investors should consider domestic income and repatriation policy simultaneously before opting for group taxation.

Keywords: group taxation, investment decisions, Monte Carlo simulations, international taxation, loss-offset rules

JEL Classification: H25, G31

Suggested Citation: Suggested Citation

Niemann, Rainer and Treisch, Corinna, Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria (July 2005). CESifo Working Paper Series No. 1506, Available at SSRN: https://ssrn.com/abstract=773987