Arbeitspapier

How low business tax rates attract multinational headquarters: municipality-level evidence from Germany

Most existing empirical evidence on the impact of profit taxation on multinational firm activity is based on cross-country data. One major drawback of such data is that countries differ not only with regard to taxes but along other dimensions which might be hard to capture by means of observable characteristics. We compile a database of more than 11,000 municipalities in Germany to analyze the sensitivity of the location decisions of foreign MNEs with respect to business tax rates which are levied directly by the municipalities. Using count data models suited for cross-sectional and panel data, we find that higher business tax rates have a negative effect on the number of foreign MNE headquarters, after controlling for other determinants of firm location decisions. On average, a one-percent reduction of the municipal business tax rate (equivalent to a decline by about 0.14 percentage points) leads to an increase in the number of headquarters of foreign MNEs by about 0.05. Hence, the average municipality needs to reduce its business tax rate by 20% to attract one foreign MNE.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 2517

Klassifikation
Wirtschaft
Multinational Firms; International Business
Business Taxes and Subsidies including sales and value-added (VAT)
Fiscal Policies and Behavior of Economic Agents: Firm
General Regional Economics (includes Regional Data)
Thema
Multinational firms
profit taxation
regional public finance
count data
Gemeindesteuer
Unternehmensbesteuerung
Standortfaktor
Multinationales Unternehmen
Standortwahl
Zähldatenmodell
Deutschland

Ereignis
Geistige Schöpfung
(wer)
Becker, Sascha O.
Egger, Peter
Merlo, Valeria
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2009

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Becker, Sascha O.
  • Egger, Peter
  • Merlo, Valeria
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2009

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