Q2. What have the authors stated for future works in "Saving taxes through foreign plant ownership" ?
The authors employ data on 33, 577 plants in 27 European economies between 1996 and 2003 to estimate the average tax savings effect of foreign plant ownership, while considering endogenous selection of foreign ownership. Their estimates suggest a savings effect of 594 Euros per employee or about 56 percent as compared to domestically-owned subsidiaries.
Q3. What is the cost of production for both modes of ownership?
The costs of production for both modes of ownership areC(qs) = f + γ qs C(q∗s) = f ∗ + γ∗ q∗s s = e,m,where the first cost element corresponds to fixed costs and the second one denotes variable (marginal) costs.
Q4. What are the main reasons why foreign subsidiaries differ from domestic ones?
The host country-specific tax payments of foreign subsidiaries may differ from those of domestic ones for four major reasons: (i) alternative effective tax rates that are composed of parent and host country statutory tax rates and deductions from the tax base, (ii) transfer pricing, (iii) financial policies at the firm-level, and (iv) preferential tax treatment of foreign-owned firms.
Q5. How do the authors determine the probability of exhibiting a foreign owner?
The authors determine the probability of exhibiting a foreign owner by the following set of variables: firm age and firm age squared; the number of plants, the ratio of foreign MNE affiliates to domestic firms, and the number of employees per firm in region r and industry n; worker compensation in region r; wage cost per employee and cost of intermediate goods in industry n.
Q6. What is the reason why a mobile firm prefers to go multinational?
the existence of trade costs may explain why the mobile firm prefers paying a certain ‘tax premium’ (i.e., a positive tax rate) and going multinational as compared to exporting in the absence of taxation.
Q7. How many plants did the authors employ between 1996 and 2003?
The authors employ data on 33, 577 plants in 27 European economies between 1996 and 2003 to estimate the average tax savings effect of foreign plant ownership, while considering endogenous selection of foreign ownership.
Q8. What is the tax rate on profits of local firms in the foreign country?
a typical local firm solvesmax q∗s≥0Π∗s(q ∗ s) = (1− τ∗) {(α− βQs − γ∗) q∗s − f∗} s = e, m, (3)where τ∗ is the tax rate on profits of local firms in the foreign country.
Q9. What is the tax rate on the profits of the mobile firm in the foreign country?
The multinational firm’s decision problem ismax qm≥0Πm(qm) = (1− τ∗∗) {(α− βQm − γ) qm − fm} , (1)where τ∗∗ is the tax rate on the profits of the mobile firm in the foreign country.
Q10. what is the aver age of a multinational?
The aver age effe ctof fore ignowne rwsh ipon tax paym ents ism easu red asth edi ffer ence todo mes tical lyow ne d fir m s' ta x pa ym en ts .14on market attractiveness for multinationals measured by the ratio of foreign to national affiliates in region r and industry n as well as on firm size in terms of the number of employees.