Abstract
Corporation tax rates significantly influence the location of foreign direct investment (FDI) as well as company decisions on corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. While direct taxation remains within the competence of individual EU Member States, the European Court of Justice (ECJ) has faced an increasing number of corporation tax-related cases over recent years and its judgments have significantly redrawn the European tax landscape. The present paper reviews and synthesises these ECJ decisions and analyses their implications for the FDI decisions of multinational corporations.
Similar content being viewed by others
References
Altshuler, R., H. Grubert and T.S. Newlon, ‘Has US Investment Abroad Become More Sensitive to Tax Rates?’, in J.R. Hines Jr., ed., International Taxation and Multinational Activity (Chicago, University of Chicago Press 2001).
Craig, A., EU Law and British Tax — Which Comes First? (London, Centre for Policy Studies 2003).
Desai, M., C.F. Foley and J.R. Hines Jr., ‘Chains of Ownership, Regional Tax Competition, and Foreign Direct Investment’, in H. Herrmann and R. Lipsey, eds., Foreign Direct Investment in the Real and Financial Sector of Industrial Countries (Heidelberg, Springer Verlag 2003).
Desai, M., C.F. Foley and J.R. Hines Jr., ‘The Demand for Tax Haven Operations’, 90 Journal of Public Economics (2006) pp. 513–531.
Devereux, M.P., and R. Griffith, ‘The Impact of Corporate Taxation on the Location of Capital: A Review’, 9 Swedish Economic Policy Review (2002) pp. 79–102.
Devereux, M.P., R. Griffith and A. Klemm, ‘Corporate Income Tax Reforms and International Tax Competition’, 17 Economic Policy (2002) pp. 451–495.
Gropp, R., and Kostial, K., The Disappearing Tax Base: Is Foreign Direct Investment Eroding Corporate Income Taxes?, ECB Working Paper No. 31 and IMF Working Paper No. 00/173 (2000).
Grubert, H., ‘Taxes and the Division of Foreign Operating Income among Royalties, Interest, Dividends and Retained Earnings’, 68 Journal of Public Economics (1998) pp. 269–290.
Grubert, H., ‘Tax Planning by Companies and Tax Competition by Governments: Is There Evidence of Changes in Behavior?’, in J.R. Hines Jr., ed., International Taxation and Multinational Activity (Chicago, University of Chicago Press 2000) pp. 113–139.
Grubert, H., and J. Mutti, ‘Do Taxes Influence Where U.S. Corporations Invest?’, 53 National Tax Journal (2000) pp. 825–839.
Hines Jr., J.R., ‘Taxes, Technology Transfer and the R&D Activities of Multinational Firms’, in M. Feldstein, J.R. Hines Jr. and R.G. Hubbard, eds., The Effects of Taxation on Multinational Corporations (Chicago, University of Chicago Press 1995) pp. 225–252.
Hines Jr., J.R., ‘Lessons from Behavioural Responses to International Taxation’, 52 National Tax Journal (1999) pp. 305–322.
Hintsanen, L., and K. Pettersson, ‘The Implications of the ECJ Holding the Denial of Finnish Imputation Credits in Cross-Border Situations to Be Incompatible with the EC Treaty in the Manninen Case’, 45 European Taxation (2005) pp. 130–137.
Meussen, G.T.K., ‘The Advocate General’s Opinion in the “D” Case: Most-Favoured-Nation Treatment and the Free Movement of Capital’, 45 European Taxation (2005a) (pp. 52–55).
Meussen, G.T.K., ‘The Marks & Spencer Case: The Final Countdown Has Begun’, 45 European Taxation (2005) pp. 160–163.
OECD, The OECD Project on Harmful Tax Practices: 2001 Project Report (Paris, OECD 2001).
Pavelin, S., and F. Barry, ‘The Single Market and the Geographical Diversification of Leading Firms in the EU’, 36 Economic and Social Review (2005) pp. 1–17.
Scarpetta, S., ‘Assessing the Role of Labour Market Policies and Institutional Settings on Unemployment: A Cross-Country Study’, 26 OECD Economic Studies (1996) pp. 43–98.
Slaughter, M., ‘Host-Country Determinants of US Foreign Direct Investment into Europe’, in H. Herrmann and R. Lipsey, eds., Foreign Direct Investment in the Real and Financial Sector of Industrial Countries (Berlin, Springer 2003) pp. 7–32.
Terra, B.J.M., and P.J. Wattel, European Tax Law, 4th edn. (The Hague, Kluwer Law International 2005) pp. 194–197.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Barry, F., Healy-Rae, R. FDI Implications of Recent European Court of Justice Decisions on Corporation Tax Matters. Eur Bus Org Law Rev 11, 125–146 (2010). https://doi.org/10.1017/S156675291010007X
Published:
Issue Date:
DOI: https://doi.org/10.1017/S156675291010007X