International Tax and Public Finance

, Volume 23, Issue 1, pp 82–113 | Cite as

Multiple taxes and alternative forms of FDI: evidence from cross-border acquisitions

  • Nils Herger
  • Christos Kotsogiannis
  • Steve McCorriston


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.


Corporate taxation Cross-border acquisitions Location choice Poisson regression Sales taxes 

JEL Classifications

F15 F21 F23 F33 



The comments of two anonymous referees are acknowledged with thanks. We also thank Johannes Becker, Mick Keen, Arjan Lejour, Leonzio Rizzo, seminar participants at the IMF and the University of Ferrara and conference participants at the ZEW-Mannheim Conference on ‘Taxing Multinational Firms’ for comments on an earlier version of this paper. The usual disclaimer applies. Kotsogiannis also acknowledges financial support from the Spanish Ministry of Economy and Competitiveness, Research Project No. ECO2012-37572.

Supplementary material

10797_2015_9351_MOESM1_ESM.pdf (141 kb)
Supplementary material 1 (pdf 140 KB)


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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  • Nils Herger
    • 1
  • Christos Kotsogiannis
    • 2
    • 3
  • Steve McCorriston
    • 2
  1. 1.Study Center GerzenseeGerzenseeSwitzerland
  2. 2.Department of EconomicsUniversity of Exeter Business SchoolExeterUK
  3. 3.CESIfoMunichGermany

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