Do taxes affect number of foreign enterprises controlled abroad by Slovak companies in the age of globalization?

Abstract

Research background: Globalization has so far brought the possibility of international trade as well as the possibility of establishing companies abroad. Countries see a number of benefits in attracting foreign enterprises. However, the question arises about how countries may affect the number of enterprises established by domestic companies abroad? Purpose of the article: The aim of this article is to find out whether corporate income tax rates have an impact on establishment of foreign controlled companies by Slovak companies abroad. Secondly, the aim of the work is to uncover whether trading across borders (which represents globalization), may influence the decision-making of such companies. To verify this, two groups of countries were created: one with a lower and the other with a higher average corporate income tax rates compared to the average rates in the Slovakia. The hypothesis is that paying taxes plays negative role in the number of foreign controlled enterprises by Slovak companies. Methods: To estimate the hypothesis, the panel regression analysis is applied. Findings & Value added: The results of the work may help in policy making decisions aimed at monitoring of foreign controlled companies from the Slovak republic. The findings reveal that taxes might not be the best, and at the same time the results reveal different area that may affect the establishment of such companies – namely trading across borders.