DP13105 Does a Tax Credit matter for Job Creation by Multinational Enterprises?

Author(s): Jozef Konings, Cathy Lecocq, Bruno Merlevede
Publication Date: August 2018
Keyword(s): employment, Foreign direct investment, Multinational Enterprises, Tax policy
JEL(s): F21, F23, H25
Programme Areas: Public Economics, International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13105

We analyze the impact of a tax credit on jobs in multinational enterprises. In particular, we exploit the introduction of the 'notional interest deduction' regime in Belgium in 2006, an 'allowance for corporate equity', which aimed to provide an attractive tax system for multinational enterprises active in Belgium. We study employment growth in foreign affiliates of MNEs in Belgium and use as a control group the affiliates of the same MNEs in France. We find that the tax credit has increased employment in Belgian affiliates by 6 to 8 percent over the period 2006-2008.