Taxes and the financial structure of German inward FDI

The paper analyses the financial structure of German inward FDI. From a tax perspective, intra-company loans granted by the parent should be all the more strongly preferred over equity the lower the tax rate of the paren
The paper analyses the financial structure of German inward FDI. From a tax perspective, intra-company loans granted by the parent should be all the more strongly preferred over equity the lower the tax rate of the parent and the higher the tax rate of the German affiliate. From our study of a panel of more than 8,000 non-financial affiliates in Germany, we find only small effects of the tax rate of the foreign parent. However, our empirical results show that subsidiaries that on average are profitable react more strongly to changes in the German corporate tax rate than this is the case for less profitable firms. This gives support to the frequent concern that high German taxes are partly responsible for the high levels of intracompany loans. Taxation, however, does not fully explain the high levels of intra-company borrowing. Roughly 60% of the cross-border intra-company loans turn out to be held by firms that are running losses. JEL - Klassifikation H25 , F23 .
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Metadaten
Author:Fred Ramb, Alfons J. Weichenrieder
URN:urn:nbn:de:hebis:30-6226
Parent Title (German):CESifo GmbH: CESifo working papers ; No. 1355 : Category 1, Public finance
Publisher:CESifo
Place of publication:München
Document Type:Working Paper
Language:English
Date of Publication (online):2005/04/11
Year of first Publication:2004
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/04/11
Tag:Germany; financial structure ; foreign direct investment ; taxation
SWD-Keyword:Direktinvestition / Internationale Finanzierung / Kapitalstruktur / Auslandsniederlassung / Steuerbelastung / Deutschland
Pagenumber:28
Source:CESifo working papers ; 1355
HeBIS PPN:128817046
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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