The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
In 2009, the United Kingdom changed from a worldwide to a territorial tax system, abolishing
dividend taxes on foreign repatriation from many low-tax countries. This paper assesses the
causal effect of territorial taxation on real investments, using a unique dataset for multinational
affiliates in 27 European countries and employing the difference-in-difference approach. It finds
that the territorial reform has increased the investment rate of UK multinationals by 15.7
percentage points in low-tax countries. In the absence of any significant investment reduction
elsewhere, the findings represent a likely increase in total outbound investment by UK