Abstract
This paper examines the determinants of a multinational enterprise's (MNEs) decision to set up tax haven subsidiaries. We adapt the firm-specific advantage–country-specific advantage (FSA–CSA) framework and construct a number of empirically testable hypotheses. The analysis is based on a database covering 14,209 MNEs in twelve OECD countries. We find that the variety of capitalism of a MNEs home location and the level of technological intensity has a strong impact on this decision. We also find that the home country corporate tax rate has a minimal impact. This suggests that corporate tax liberalisation is unlikely to deter MNEs from undertaking this activity.
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