The Tax Attractiveness of EU Locations for corporate Investments: A Stocktaking of past Developments and recent Reforms

Tax incentives are a key component of governments’ investment policy mix as they directly impact companies’ tax burden. In this paper, we illustrate the EU’s tax attractiveness as investment location over time in terms of effective average tax rates and evaluate potential tax reform options. Our quantitative assessment of recent tax policies suggests that corporate tax rate cuts, notional interest deductions and R&D incentives reduce the effective average tax rate significantly. However, we argue that targeted measures such as accelerated depreciations and R&D incentives are most suitable for creating an attractive tax environment for business investments, especially in the context of the global minimum tax.

Gundert, Hannah, Katharina Nicolay, Daniela Steinbrenner und Sophia Wickel (2023), The Tax Attractiveness of EU Locations for corporate Investments: A Stocktaking of past Developments and recent Reforms, ZEW Discussion Paper Nr. 23-066, Mannheim.