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Autor:innen: 
Erscheinungsjahr: 
2007
Schriftenreihe/Nr.: 
ZEW Discussion Papers No. 07-071
Verlag: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Zusammenfassung: 
This paper investigates whether the size of multinationals? real investments in a high-tax country is affected by profit shifting activities. A simple theoretical analysis shows that tax rates abroad impact the cost of capital in the presence of profit shifting activities of multinational companies. As profit shifting opportunities constitute a competitive advantage, the respective size of investments should theoretically increase if profits can be shifted to a lower taxing country. An empirical analysis, based on a panel of German inbound investments, confirms a positive tax response of real investments with a decreasing tax rate at the foreign direct investor?s home country. Hence, the results suggest that the size of foreign investments in a high-tax country is positively affected by lower foreign taxation of shifted profits.
Schlagwörter: 
Taxation
Multinationals
Profit Shifting
Investment Decisions
Firm-level Data
JEL: 
H32
H25
F23
F21
Dokumentart: 
Working Paper

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