Saving Taxes Through Foreign Plant Ownership

29 Pages Posted: 29 Jan 2007

See all articles by Peter H. Egger

Peter H. Egger

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment; Ludwig-Maximilians University of Munich; CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Wolfgang Eggert

University of Freiburg - Institute of Public Finance; CESifo (Center for Economic Studies and Ifo Institute)

Hannes Winner

University of Salzburg - Department of Economics and Social Sciences; Austrian Institute of Economic Research (WIFO); University of Oxford - Oxford University Centre for Business Taxation; University of Innsbruck - Department of Economics & Statistics

Date Written: January 2007

Abstract

This paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership. We employ a model of endogenous foreign subsidiary ownership to derive a set of empirically testable hypotheses about the differential taxation of foreign- and domestically-owned subsidiaries. We assess these hypotheses in a dataset of 33,577 European foreign- and domestically-owned manufacturing plants. We identify a significant tax-saving of endogenous foreign ownership. On average, foreign owners pay 594 Euros per employee or about 56 percent less than domestic owners of similar subsidiaries. This effect is larger in thinner markets with fewer plants, in markets with a greater relative presence of foreign owners, and for foreign owners of larger plants.

Keywords: company taxation, multinational firms, propensity score matching

JEL Classification: H25, H73, F23, C21

Suggested Citation

Egger, Peter H. and Eggert, Wolfgang and Winner, Hannes, Saving Taxes Through Foreign Plant Ownership (January 2007). CESifo Working Paper Series No. 1887, Available at SSRN: https://ssrn.com/abstract=959997 or http://dx.doi.org/10.2139/ssrn.959997

Peter H. Egger (Contact Author)

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment ( email )

Poschingerstr. 5
Munich, DE-81679
Germany
+49 0 89 9224 1238 (Phone)
+49 0 89 985369 (Fax)

HOME PAGE: http://www.cesifo-group.de/portal/page?_pageid=36,425628&_dad=portal&_schema=PORTAL

Ludwig-Maximilians University of Munich

Schackstr. 4
Munich, 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Poschinger Str. 5
Munich, DE-81679
Germany

Wolfgang Eggert

University of Freiburg - Institute of Public Finance ( email )

D-79098 Freiburg
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Hannes Winner

University of Salzburg - Department of Economics and Social Sciences ( email )

Residenzplatz9
Salzburg, 5010
Austria

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

University of Oxford - Oxford University Centre for Business Taxation ( email )

Saïd Business School
Park End Street
Oxford, OX1 1HP
United Kingdom

University of Innsbruck - Department of Economics & Statistics ( email )

Universitatsstrasse 15
Innsbruck, A-6020
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
183
Abstract Views
1,020
rank
213,600
PlumX Metrics