Where Does Multinational Investment Go with Territorial Taxation? Evidence from the UK

January 12, 2018

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Format: Chicago

Li Liu. Where Does Multinational Investment Go with Territorial Taxation? Evidence from the UK, (USA: International Monetary Fund, 2018) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In 2009, the United Kingdom changed from a worldwide to a territorial tax system, abolishing dividend taxes on foreign repatriation from many low-tax countries. This paper assesses the causal effect of territorial taxation on real investments, using a unique dataset for multinational affiliates in 27 European countries and employing the difference-in-difference approach. It finds that the territorial reform has increased the investment rate of UK multinationals by 15.7 percentage points in low-tax countries. In the absence of any significant investment reduction elsewhere, the findings represent a likely increase in total outbound investment by UK multinationals.

Subject: Corporate income tax, Currencies, Dividend tax, Labor, Money, National accounts, Private investment, Taxes, Wages

Keywords: Corporate income tax, Corporate tax policy, Currencies, Dividend tax, Foreign direct investment, Global, Gross investment, Investment by UK, Investment response, Multinational firms, Private investment, Retained earnings, Tax country, Tax rate, UK affiliate, UK multinational, Wages, WP

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/007
Stock No:

WPIEA2018007
ISBN:

9781484337493
ISSN:

1018-5941

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