ABSTRACT
In this chapter we are concerned with taxation of MNEs when there are competing potential host countries. The analysis is most relevant for export-oriented manufacturing affiliates rather than for importsubstituting investment, for which competition between firms is relatively more important. Nationalization is ruled out, meaning that internalization of activities within MNEs is taken for granted. This is partly motivated by the fact that nationalization is not an issue for all direct investment, whereas taxation is. In particular, nationalization does not often pose a threat to export-oriented investment where the parent’s access to foreign markets tends to be crucial. Furthermore, complete information is assumed to prevail throughout. Applications to the real world will require adjustments for firm and industry-specific conditions, including imperfections in information.
