Corporate Taxes And The Location Of Intangible Assets Within Multinational Firms

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.