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Does a tax credit matter for job creation by Multinational Enterprises?

18 Settembre 2017
San Francesco - Via della Quarquonia 1 (Classroom 2 )
In this paper, we study the impact of a tax credit, the 'Notional Interest Deduction' (NID), on the employment growth at affiliates' of multinational enterprises (MNEs) in Belgium. To this end, we use the income statements of foreign MNEs with affiliates in Belgium and take as a control group the affiliates of the same MNEs located in France. Based on a standard difference-in-difference analysis, we show that the tax credit has increased employment in Belgian affiliates by about 7 percent over the period 2006-2008. Our results further provide evidence that small affiliates are more responsive to tax incentives than large affiliates. We detect the effect in non-manufacturing sectors only. Finally, we find indications that the effect is largely driven by relocation of jobs between affiliates, rather than overall expansion of activities.
Merlevede, Bruno