Working Paper: CEPR ID: DP3952
Authors: Harry Huizinga; Gaetan Nicodeme
Abstract: Economic integration in Europe has not led to a ?race to the bottom? regarding corporate income taxes. This Paper documents trends in the foreign ownership of companies in Europe and examines whether foreign ownership has exerted a positive influence on corporate income tax levels. Using company-level data, we document that foreign ownership share in Europe stood at around 21.5% in the year 2000. The estimation suggests that a one percentage point increase in foreign ownership increases the average corporate income tax rate between 0.5-1%. Further international economic integration is likely to lead to higher foreign ownership shares with a concomitant positive influence on corporate taxation levels.
Keywords: corporate taxation; foreign ownership; tax competition
JEL Codes: F21; H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign ownership share (F23) | average corporate income tax rate (H25) |
| foreign ownership share (F23) | corporate tax burdens as a percentage of assets (G32) |
| average corporate income tax rate (H25) | foreign ownership share (F23) |