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Title: International Taxation and Multinational Firm Location Decisions

Author(s): Salvador Barrios, Harry Huizinga, Luc Laeven and Gaëtan Nicodème

Publication Date: November 2008

Keyword(s): corporate taxation, dividend withholding taxation and location decisions

Programme Area(s): Public Economics

Abstract: Using a large international firm-level data set, we estimate separate effects of host and parent country taxation on the location decisions of multinational firms. Both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries. In fact, the impact of parent country taxation is estimated to be relatively large, possibly reflecting its international discriminatory nature. For the cross-section of multinational firms, we find that parent firms tend to be located in countries with a relatively low taxation of foreign-source income. Overall, our results show that parent-country taxation ? despite the general possibility of deferral of taxation until income repatriation ? is instrumental in shaping the structure of multinational enterprise.

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Bibliographic Reference

Barrios, S, Huizinga, H, Laeven, L and Nicodème, G. 2008. 'International Taxation and Multinational Firm Location Decisions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7047