International Tax and Public Finance

, Volume 10, Issue 2, pp 107–126

Evaluating Tax Policy for Location Decisions

  • Michael P. Devereux
  • Rachel Griffith

DOI: 10.1023/A:1023364421914

Cite this article as:
Devereux, M.P. & Griffith, R. International Tax and Public Finance (2003) 10: 107. doi:10.1023/A:1023364421914


We consider the impact of taxation when investors face a discrete choice between two or more mutually exclusive projects; in particular we consider the location choice of multinationals. Such choices depend on an effective average tax rate. We propose a precise measure of this rate, which is shown to be equal to a weighted average of an effective marginal tax rate and an adjusted statutory tax rate, where the weights depend on the profitability of the investment. Estimates of the distribution of this measure are presented and compared for domestic and international investment in the USA, France, Germany and the UK. We analyse the impact of harmonising corporate tax rates in Europe on incentives to locate in France, Germany and the UK.

effective tax rates discrete investment location multinationals 

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Michael P. Devereux
    • 1
  • Rachel Griffith
    • 2
  1. 1.Institute for Fiscal Studies and CEPR, Department of Economics, Warwick UniversityUniversity of WarwickCoventryUK
  2. 2.Institute for Fiscal StudiesUniversity College London and CEPRLondonUK

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