Saving Taxes Through Foreign Plant Ownership

By Peter Egger, Wolfgang Eggert, Hannes Winner. Social Science Research Network, 2010

183 citations recorded by the source corpus.

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 data- set of 33,577 European foreign- and domestically-owned manufacturing plants. We identify a significant tax-saving of endogenous foreign owner- ship. 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.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/03179f90148c91971f435f61b83d4ba479309573

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Citations in the corpus

Firms' Financial Choices and Thin Capitalization Rules under Corporate Tax Competition (2012, background): “2 For Europe, Egger et al. (2010b) have estimated, using econometric matching techniques, that the tax burden of an otherwise similar manufacturing plant is reduced by more than 50% when the parent ﬁrm is foreign-owned, rather than domestically-owned.”
Transfer Pricing by Multinational Firms: New Evidence from Foreign Firm Ownerships (2016, background): “For empirical evidence, see Huizinga, Laeven, and Nicodeme (2008) and Egger et al. (2010) among others.”
Comparing UK Tax Returns of Foreign Multinationals to Matched Domestic Firms (2019, unknown): “Further, by using administrative data, I contribute to the growing literature examining profit reporting of companies using tax returns data (Grubert et al. (1993),Grubert (1998), Mills and Newberry (2004), Altshuler et al.”
Profit Shifting and “Aggressive” Tax Planning by Multinational Firms: Issues and Options for Reform (2013, unknown): “20 Egger et al. (2010).”
Foreign investors' interests and corporate tax avoidance: Evidence from an emerging economy (2015, background): “Similarly, Egger et al. (2010) find higher rates of tax avoidance to be related to high-tax host countries while examining the impacts of foreign plant ownership on corporate tax avoidance among 31 European countries.”