Multiple Taxes and alternative Forms of FDI: Evidence from Cross-Border Acquisitions

Principal Investigator(s):  View help for Principal Investigator(s) Nils Herger, Study Center Gerzensee

Version:  View help for Version V2

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Project Citation: 

Herger, Nils. Multiple Taxes and alternative Forms of FDI: Evidence from Cross-Border Acquisitions. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2026-01-23. https://doi.org/10.3886/E244587V2

Project Description

Summary:  View help for Summary This paper explores the role of tax instruments in affecting foreign direct investment (FDI), paying particular attention on their effect on two forms of FDI strategy, ‘horizontal’ and ‘vertical’. Applying a decomposition of FDI strategies to the universe of cross-border mergers (the dominant form of FDI) over the period 1999–2010, it emerges that taxes have a much more nuanced effect on FDI than frequently suggested; while corporate taxes affect FDI negatively, the tax elasticity varies depending on the FDI strategy (with vertical FDI being in general more responsive), the exact measure of taxation, and international tax considerations (double taxation, withholding taxes). Sales taxes also affect FDI, but only horizontally.



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V2 [2026-01-23]

V1 [2026-01-23]

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