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The Advantages and Disadvantages of Taxation Strategies Applied on MNEs in the European Union

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  • Tănase Laurențiu-Mihai

    (Bucharest University of Economic Studies, Bucharest, Romania; This paper was co-financed by The Bucharest University of Economic Studies during the PhD program.)

  • Drăghici Irene-Ioana

    (Bucharest University of Economic Studies, Bucharest, Romania)

Abstract

In the context of globalization, the advantages and disadvantages of the taxation strategies of multinational companies include the scope of taxes collected at the state budget, as well as foreign direct investment inflows, both having the possibility to influence economic growth directly or indirectly. In this paper, we tested with unifactorial linear model the theory that direct investment inflows have an insignificant impact on economic growth as well as the impact of collected taxes on economic growth. The research was carried out on four member states of the European Union, namely Germany, France, Romania and Bulgaria, and the data collected covered the period 2012-2021. The research results highlighted that a developed country that has a lower tax rate generated more foreign direct investment inflows and less corporate taxes collected at the state budget than a developed country that has a much higher tax rate, but taxes had a larger contribution to GDP growth when we consider only this variable. On the other hand, a developing country with an average tax rate but a larger economy generated more foreign direct investment inflows and more taxes collected at the state budget than a country with a lower rate and a smaller economy.

Suggested Citation

  • Tănase Laurențiu-Mihai & Drăghici Irene-Ioana, 2023. "The Advantages and Disadvantages of Taxation Strategies Applied on MNEs in the European Union," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 17(1), pages 298-313, July.
    • Handle: RePEc:vrs:poicbe:v:17:y:2023:i:1:p:298-313:n:4
    DOI: 10.2478/picbe-2023-0031
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    References listed on IDEAS

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    1. Arvin, Mak B. & Pradhan, Rudra P. & Nair, Mahendhiran S., 2021. "Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 468-489.
    2. Kimberly Clausing, 2007. "Corporate tax revenues in OECD countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 115-133, April.
    3. Ines Kersan-Škabić, 2015. "The Importance of Corporate Taxation for FDI Attractiveness of Southeast European Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(1), pages 105-122, March.
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