Foreign (in)direct investmentand corporate taxation

This paper investigates the role of corporate taxation with respect to a multinational'sinvestment decision, in which the multinational can pursue either a direct or an indirectinvestment strategy. The latter involves at least three corporate entities and opens upenhanced opportunities for international tax planning. The existence of preferential taxtreatment for conduit or intermediate corporate entities presumably changes the role ofcorporate taxation in destination countries, because it supports multinationals in avoidingtaxes. The empirical findings of this study are consistent with theoretical predictions andsuggest that tax effects differ, depending on the investment regime. The endogeneity of thestructural choice - direct versus indirect - is taken into account by a switching regressionapproach.[...]