Effect of taxes on direct investments. The focus as a rule is on the influence of corporation taxes. Are other taxes also relevant for the location decisions of enterprises?
Empirical analysis. Econometric methods.
Data on direct investment from the Bundesbank.
The study provides an empirical analysis of the impact of taxes other than profit taxes on both investment and location decisions of German multinationals. Besides effects of corporate income taxes, the results confirm significant adverse effects of nonprofit taxes such as property taxes, sales taxes and VAT, and import duties on the level of FDI. However, once country-specific fixed effects are included, most of the effects of nonprofit taxes vanish. This is supported by the analysis of location decisions, where taxes other than corporate income taxes are not found to exert any adverse effects on the location probability in a setting with country-specific fixed effects.
Buettner, Thiess and Georg Wamser, "The Impact of Non-Profit Taxes on Foreign Direct Investment: Evidence from German Multinationals", International Tax and Public Finance 16 (03) , 2009, 298-320.
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