Corporate Taxes And The Location Of Intangible Assets Within Multinational Firms
Source: University of Munich
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 in transparent 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, the authors find that the lower a subsidiary's tax rates relative to other affiliates of the multinational group the higher is its level of intangible asset investment.