Anti-Avoidance Legislations and the Location Choice of Multinational Firms∗

We analyse whether the location decision of multinational corporations is affected by legislations that restrict tax-motivated profit shifting by multinational firms. Using rich panel information on the location of German multinational firms, we find that the introduction and tightening of thin capitalisation rules and transfer price documentation requirements significantly reduces a country’s probability to attract subsidiaries of multinationals. We discuss implications of our findings for the welfare assessment of anti-avoidance laws