New evidence on the tax burden of MNC activities in Central- and East-European new member states

Bellak, Christian and Leibrecht, Markus and Römisch, Roman (2005) New evidence on the tax burden of MNC activities in Central- and East-European new member states. Discussion Papers SFB International Tax Coordination, 2. SFB International Tax Coordination, WU Vienna University of Economics and Business, Vienna.


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Company-taxation policies in the Central and East European New Member States (CEE-NMS) have been frequently characterised as tax-cutting strategies in order to attract Foreign Direct Investment (FDI). On the basis of a survey of six empirical studies a median value of the tax-rate elasticities of FDI of -0.22 in CEE-NMS and mediterranean periphery countries is derived. Yet, these tax-rate elasticities probably suffer from a sort of measurement error bias since these studies entirely rely on the host country Statutory tax rate as measure of tax burden. Building on a thorough criticism of FDI as a measure reflecting multinational activity and the Statutory tax rate as a reliable measure of the effective tax burden, 315 effective average bilateral tax rates (BEATR) are calculated for seven home countries and five CEE-NMS for the period 1996-2004, following the approach of Devereux and Griffith (1998). Since our empirical results show substantial differences in the variability of the host country Statutory tax rates and the BEATRs, it is contended that the latter should be used as explanatory variables in empirical studies.

Item Type: Paper
Keywords: corporate income taxation / effective tax rate / Foreign Direct Investment / Multinational Enterprises
Classification Codes: RVK QL 800 ; JEL F2, H00, H25, H77
Divisions: Departments > Finance, Accounting and Statistics > Accounting and Auditing > Betriebswirtschaftliche Steuerlehre
Departments > Volkswirtschaft
Departments > Öffentliches Recht und Steuerrecht > Österr. und Internat. Steuerrecht
Depositing User: Repository Administrator
Date Deposited: 23 Sep 2005 06:44
Last Modified: 22 Oct 2019 00:41


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