Corporate Taxation and Multinational Activity

Figure 5: Difference in affiliate production with and without corporate tax-
ation: Credit and exemption method (difference between Figures 1 and 2)

Figure 6: Difference in affiliate production with and without corporate tax-
ation: Deduction method (difference between Figures 1 and 3)

Figures 5 and 6 provide a bird’s eye view on the difference between the surfaces in Figures 2 and
1 and Figures 3 and 1, respectively. Obviously, corporate taxation exerts a negative impact on
the foreign affiliate production mostly of relatively small exemption/credit economies. There,
horizontal MNE activity is dominant in the equilibrium without taxation. Similarly, a small
deduction country’s MNE activity is most likely hurt by taxation. Especially, the latter is
true for relatively (but not too) skilled labor abundant parent countries.

39

<<   38   39   40   41   42   43   44   >>

More intriguing information