Corporate Taxes and the Location of Intangible Assets within Multinational Firms

Dischinger, Matthias and Riedel, Nadine (2011) Corporate Taxes and the Location of Intangible Assets within Multinational Firms. Journal of Public Economics, 95 (7-8). pp. 691-707.

Abstract

Intangible assets, like patents and trademarks, are increasingly seen as the key to competitive success and as the drivers of corporate profit. Moreover, they constitute a major source of profit shifting opportunities in multinational enterprises (MNEs) due to a highly intransparent transfer pricing process. This paper argues that, for both reasons, MNEs have an incentive to locate intangible property at affiliates with a relatively low corporate tax rate. Using panel data on European MNEs and controlling for unobserved time–constant heterogeneity between affiliates, we find that the lower a subsidiary's corporate tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment. This effect is statistically and economically significant, even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern.

Item Type: Article
Keywords: Multinational enterprise; Intangible assets; Tax planning; Micro data
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 28 May 2012 14:14
Last Modified: 23 Oct 2015 14:07
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3432

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