International Tax Competition from a Business Perspective

To investigate international tax competition and its effects on the German economy, the ifo Institute interviewed over 1,250 German family and non-family enterprises from April to July 2018 on behalf of the Stiftung Familienunternehmen. According to the results of the company survey, the majority (59.2%) of companies rated international tax competition as strong or rather strong. Around 60% of the companies surveyed with permanent establishments in the USA can reap financial gains from the tax rates reduced in the USA as a result of tax reform. Among those companies operating exclusively in Germany, only 1.9% stated that they are in a position to benefit from international tax competition as a whole. No significant increase in investment activity in the USA was recorded among the companies surveyed as a result of the tax reform. Of the companies with production facilities in the USA, just under 27% plan to expand US capacities and 14.2% plan to set up new ones. A clear majority of the companies surveyed are of the opinion that German politicians should take measures to react to international tax competition. They identified reducing bureaucracy as the area in which reforms are most urgently needed.