We consider the impact of taxation when investors face a discrete choice between two or more mutually exclusive projects; in particular we consider the location choice of multinationals. Such choices depend on an effective average tax rate. We propose a precise measure of this rate, which is shown to be equal to a weighted average of an effective marginal tax rate and an adjusted statutory tax rate, where the weights depend on the profitability of the investment. Estimates of the distribution of this measure are presented and compared for domestic and international investment in the USA, France, Germany, and the UK. We analyse the impact of harmonising corporate tax rates in Europe on incentives to locate in France, Germany and the UK.
Authors
![Michael Devereux](/sites/default/files/styles/square_desktop/public/2022-07/Michael_Devereux.jpg?itok=j8Yfozzo)
Research Associate University of Oxford and Oxford Centre for Business Taxation
Michael joined the IFS in 1982 and he has been a Research Fellow since 1990 and a Professor of Economics at the University of Oxford.
![Rachel Cassidy](/sites/default/files/styles/square_desktop/public/2022-08/Rachel_Griffith.jpg?itok=YovGgLq9)
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Journal article details
- DOI
- 10.1023/A1023364421914
- Publisher
- Springer
- Issue
- March 2003
Suggested citation
Devereux, M and Griffith, R. (2003). 'Evaluating tax policy for location decisions' (2003)
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