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Title:Quality versus quantity: the composition effect of corporate taxation on foreign direct investment PDF Logo
Authors:Becker, Johannes
Fuest, Clemens
Issue Date:2007
Series/Report no.:CESifo working paper 2126
Abstract:This paper studies corporate taxation in a model where foreign investment of firms may affect the profitability of the investor firm’s domestic activities. In this framework, corporate taxes distort the quality, not just the quantity of foreign direct investment flows. High-tax countries may see their tax revenues decrease in response to inbound foreign direct investment. Our results also imply that empirical studies on international profit shifting may overestimate the role of profit shifting. Observed profitability differences between high and low tax countries may be due to project selection. Empirical evidence in support of the main hypotheses is provided using aggregate investment and tax revenue data from a sample of OECD countries.
Subjects:corporate taxation
foreign direct investment
JEL:H25
F23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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