The study by Harald Amberger and Saskia Kohlhase (Erasmus University Rotterdam) is one of the first systematic analysis of the effect of international business taxation on the organizational form choice of multinational corporations. Using micro-level inbound FDI data for Germany, the authors find that differences in the taxation of organizational forms (e.g., withholding taxes on dividends) significantly affect the likelihood of selecting a particular legal form. The study also examines potential real economic effects of organizational form choices and documents that affiliates established as flow-throughs exhibit a lower loss propensity and are less profitable than affiliates established as subsidiaries. Taken together, the study informs policy makers about the potential responses of multinational corporations to tax-law changes and suggests that the chosen organizational form can shape the future characteristics of investments abroad.

Open Access Article: https://link.springer.com/article/10.1057/s41267-023-00614-1