Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104099
Authors: 
Stöwhase, Sven
Year of Publication: 
2002
Series/Report no.: 
Munich Discussion Paper 2002-11
Abstract: 
The theory of tax competition suggests that different tools might be used to attract physical capital and taxable profits. While it is assumed that FDI in real activity is deterred by high effective taxes, investment undertaken for purpose of profit-shifting is deterred by a higher statutory tax rate. Using information from the RWI-Database "Globalisation", which contains statistics about foreign engagements of the most important German enterprises, this paper investigates if this assumption holds in reality. Differentiating between the functional form of engagement and using a linear regression, the analysis provides evidence that FDI in real activity (production) is correlated with effective tax rates while FDI that implies more opportunities for profit shifting activities (service, finance and R&D) is correlated with the tatutory tax rate.
Subjects: 
foreign direct investment
profit shifting
multinational corporations
JEL: 
F23
H25
H26
H32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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