Tax Attractiveness and the Location of German-Controlled Subsidiaries

Keller, Sara; Schanz, Deborah

doi:10.2139/ssrn.2368713

SSRN Journal

2013

DOI: 10.2139/ssrn.2368713

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Tax Attractiveness and the Location of German-Controlled Subsidiaries

Sara Keller

Deborah Schanz

Abstract: Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in… Show more

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Cited by 2 publications

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“…The last section summarizes and concludes. 4 The Tax Attractiveness Index is applied by Keller and Schanz (2013) to analyze the influence of taxation on the location decisions of German multinational enterprises.…”

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Measuring Tax Attractiveness Across Countries

Keller

Schanz

Munich³

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper develops a new tax measure -the Tax Attractiveness Indexreflecting the attractiveness of a country's tax environment and the tax planning opportunities that are offered. Specifically, the Tax Attractiveness Index covers 16 different components of real-world tax systems, such as the statutory tax rate, the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, loss offset provision, the double tax treaty network, thin capitalization rules, and controlled foreign company (CFC) rules. We develop methods to quantify each tax factor. The Tax Attractiveness Index is constructed for 100 countries over the 2005 to 2009 period. Regional clusters in the index as well as in the application of certain tax rules can be observed. The evaluation of individual countries based on the index corresponds -but is not totally identical -with the OECD's 'black' respectively 'grey' list. By comparing the Tax Attractiveness Index with the statutory tax rate, we reveal that even high tax countries offer favorable tax conditions. Hence, the statutory tax rate is not a suitable proxy for a country's tax climate in any case since countries may set other incentives to attract firms and investments. ). However, due to the fact that it neglects tax base effects it is an unsatisfactory proxy in most cases. To overcome this shortcoming at least partially, more sophisticated tax measures that reflect effective tax burdens by capturing certain tax base determinants, such as depreciation allowances and interest deduction have been developed (see King and Fullerton 1984;Devereux and Griffith 1999, 2003;Jacobs and Spengel 1999) The term 'holding company' is not clearly defined yet. Though, a holding company is understood as a legal entity that usually does not perform operative business activities, but whose main purpose is holding and managing shareholdings in other subsidiaries. A holding company may be set up for strategic reasons, such as the regional bundling of shares. However, it is also an important tax planning tool that may be used to achieve tax advantages. Terms of use: Documents in EconStor may Keywordssuch as Bermuda, the Bahamas, the Cayman Islands, the British Virgin Islands, and the Netherlands Antilles achieve highest index values.Certain European countries such as Luxembourg, the Netherlands, Ireland, Malta, Cyprus, The Tax Attractiveness Index is applied by Keller and Schanz (2013) to analyze the influ...

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Measuring Tax Attractiveness Across Countries

Keller

Schanz

Munich³

2013

SSRN Journal

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Evaluating Impact of Tax Burden on State Financial Stability: Empirical Research of EU Countries

Skarzauskas¹

2021

TEL

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Tax Attractiveness and the Location of German-Controlled Subsidiaries

Cited by 2 publications

References 59 publications

Measuring Tax Attractiveness Across Countries

Measuring Tax Attractiveness Across Countries

Evaluating Impact of Tax Burden on State Financial Stability: Empirical Research of EU Countries

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