The Effect of International Taxation on Group Structures of Multinationals

Amberger, Harald and Kohlhase, Saskia (2018) The Effect of International Taxation on Group Structures of Multinationals. WU International Taxation Research Paper Series, 2017-02. WU Vienna University of Economics and Business, Universität Wien, Vienna.


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We examine the effect of tax burden differences between organizational forms on multinationals choosing an organizational form for a newly established foreign affiliate. Analyzing micro-level data on inbound foreign direct investment relations in Germany, we find that a higher tax burden on foreign income earned in a corporate subsidiary significantly increases the tendency of a multinational to choose a non-corporate flow-through. Income-shifting opportunities, industry-specific risk, country-level differences in regulatory quality, and host-country experience moderate this effect and thus shape the cost-benefit relation of organizational forms in cross-border settings. In addition, we document that multinationals establishing a new affiliate as a flow-through on the basis of a tax benefit invest less in that affiliate and exhibit a more complex group structure. Taken together, our results provide evidence on how tax rules shape group structures of multinationals and suggest that an asymmetric taxation of organizational forms has economic consequences.

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, Multinationals, Economic Consequences
Classification Codes: JEL M41, H25, H73, K34
Depositing User: ePub Administrator
Date Deposited: 13 Mar 2017 10:15
Last Modified: 29 Aug 2020 06:58


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