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Form follows function? Evidence on tax savings by multinational holding structures
Dreßler, Daniel
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URL:
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https://ub-madoc.bib.uni-mannheim.de/32528
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URN:
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urn:nbn:de:bsz:180-madoc-325288
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Dokumenttyp:
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Arbeitspapier
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Erscheinungsjahr:
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2012
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Titel einer Zeitschrift oder einer Reihe:
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ZEW Discussion Papers
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Band/Volume:
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12-057
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Ort der Veröffentlichung:
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Mannheim
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
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MADOC-Schriftenreihe:
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Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
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Fachgebiet:
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330 Wirtschaft
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Fachklassifikation:
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JEL:
F23 , H25 , H32,
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Freie Schlagwörter (Englisch):
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Corporate taxation , foreign direct investment , holdings , multinational firms , withholding taxes
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Abstract:
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I provide evidence on the group structures of multinationals and analyze to what
extent these structures are tax efficient. While the corporate income tax can hardly be avoided
if a subsidiary is active in a country, withholding taxes depend on the structure in which the
subsidiary is embedded. By vertically inserting holding companies or adjusting the
superior/subordinate relationship of subsidiaries, multinationals can often influence their total
tax burden, especially regarding the repatriation of profits by means of dividends. I analyze
group structures across 58 countries in the years 1996 to 2008 using the MiDi database
provided by the German Central Bank (Deutsche Bundesbank). The results show that a higher
withholding tax between two members of a group located in different countries increases the
probability of indirect participation. However, in about half of the observations, the existence
of an intermediate subsidiary does not lower the overall tax burden, and in 5% of the cases the
tax burden on repatriated profits with such a holding company is even higher than without it.
Although group structures generally seem to be tax driven, there are non-tax influencing
factors which sometimes prevail. Besides drivers of the vertical company structure, I provide
evidence of a horizontal driver: once a form of group taxation is available, groups seem to
spread their national investments across more subsidiaries.
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