The Effects of Multinationals’ Profit Shifting Activities on Real Investments


Overesch, Michael


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URL: http://ub-madoc.bib.uni-mannheim.de/1791
URN: urn:nbn:de:bsz:180-madoc-17919
Document Type: Working paper
Year of publication: 2007
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H32 F21 F23 H25 ,
Subject headings (SWD): Unternehmungssteuer , Multinationales Unternehmen , Gewinnverlagerung , Investitionsentscheidung , Betriebsdaten
Keywords (English): Taxation , Multinationals , Profit Shifting , Investment Decisions , Firm-level Data
Abstract: This paper investigates whether the size of multinationals’ real investments in a high-tax country is affected by profit shifting activities. A simple theoretical analysis shows that tax rates abroad impact the cost of capital in the presence of profit shifting activities of multinational companies. As profit shifting opportunities constitute a competitive advantage, the respective size of investments should theoretically increase if profits can be shifted to a lower taxing country. An empirical analysis, based on a panel of German inbound investments, confirms a positive tax response of real investments with a decreasing tax rate at the foreign direct investor’s home country. Hence, the results suggest that the size of foreign investments in a high-tax country is positively affected by lower foreign taxation of shifted profits.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Overesch, Michael (2007) The Effects of Multinationals’ Profit Shifting Activities on Real Investments. Open Access [Working paper]
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