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International Taxation and the Role of Organizational Form Choices for Group Structures Multinationals

Amberger, Harald and Kohlhase, Saskia (2017) International Taxation and the Role of Organizational Form Choices for Group Structures Multinationals. WU International Taxation Research Paper Series, 2017-02. WU Vienna University of Economics and Business, Universität Wien, Vienna.

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Abstract

We examine whether, when, and to what extent international taxation affects group structures of multinationals by way of organizational form choices. Analyzing micro-level data on inbound foreign direct investment relations in Germany, we find that multinationals are taxsensitive when choosing an organizational form for a foreign affiliate. We document that a one standard deviation increase in the tax burden difference between a corporate (i.e. subsidiary) and a non-corporate (i.e. flow-through) organizational form is associated with a 3.57 percentage point higher probability of establishing a flow-through. This effect, which predominantly results from differences in repatriation taxes between organizational forms, is economically meaningful and comparable to the effects of non-tax determinants. In crosssectional tests, we find that income-shifting opportunities, limited liability, group structure adjustment costs, and host-country experience moderate the tax-sensitivity. Taken together, our findings suggest that international taxation has far-reaching implications for group structures of multinationals.

Item Type: Paper
Additional Information: Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: Organizational Form Choice, Group Structures, International Taxation
Classification Codes: JEL M41, H25, H73, K34
Depositing User: ePub Administrator
Date Deposited: 13 Mar 2017 10:15
Last Modified: 13 Mar 2017 10:15
URI: http://epub.wu.ac.at/id/eprint/5446

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