UK corporation tax deters corporate headquarters from locating in the UK

Headquarter Relocations and International Taxation

Johannes Voget

This paper examines the extent of international headquarter relocations worldwide. Within a decade, about 6 percent of all multinationals relocate their headquarter to another country. The existence of a tax avoidance motive for headquarter relocations is tested. I find that the likelihood of relocating headquarters increases in the difference between the home corporate income tax rate and the average foreign subsidiaries’ corporate income tax rates if a multinational resides in a country that provides tax credits for double tax relief on repatriated dividends. Specifically, a one percentage point decrease in the foreign subsidiaries’ effective tax rates increases the likelihood of the multinational relocating its headquarters by 0.19 percentage points.

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