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The Tax Attractiveness of EU Locations for Corporate Investments: A Stocktaking of Past Developments and Recent Reforms

Author

Listed:
  • Gundert Hannah

    (ZEW Mannheim, Mannheim, Germany)

  • Nicolay Katharina

    (ZEW Mannheim, Mannheim, Germany)

  • Steinbrenner Daniela

    (ZEW Mannheim, Mannheim, Germany)

  • Wickel Sophia

    (ZEW Mannheim, Mannheim, Germany)

Abstract

In this paper, we illustrate the tax attractiveness of EU countries as investment locations over time in terms of effective average tax rates and evaluate potential tax reform options. Our quantitative assessment of recent tax policies suggests that corporate tax rate cuts, notional interest deductions and R&D incentives significantly reduce the effective average tax rate. When government budgets are constrained, however, tax incentives with a direct link to investment activities, such as accelerated depreciation and R&D incentives, are most suitable to stimulate private investment. Even after the introduction of the global minimum tax, these measures remain a viable tool to stimulate investments.

Suggested Citation

  • Gundert Hannah & Nicolay Katharina & Steinbrenner Daniela & Wickel Sophia, 2024. "The Tax Attractiveness of EU Locations for Corporate Investments: A Stocktaking of Past Developments and Recent Reforms," The Economists' Voice, De Gruyter, vol. 21(1), pages 97-132.
    • Handle: RePEc:bpj:evoice:v:21:y:2024:i:1:p:97-132:n:1002
    DOI: 10.1515/ev-2023-0066
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    More about this item

    Keywords

    effective tax rates; Devereux/Griffith methodology; global minimum tax; tax incentives; investment; location attractiveness;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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