Abstract

Complex ownership structures of multinational enterprises (MNEs) can lead to a blurred allocation of direct investment, both geographically and by economic activity. In order to minimize the groups’ tax expenditure MNEs often channel their investments along the ownership chain not only through a single holding company or special purpose entity (SPE) but instead through a large number of companies through different countries until the investment reaches the actual final destination. As a result, the immediate allocation of a compilers’ foreign direct investment most often shows typically jurisdictions attractive to holding companies and subsequently the respective sector of economic activity. Thus, to unveil the ‘true’ location and activity of the investment interest, it is necessary to look through these pass-through chains to the ultimate host economy (UHE).
One of the current subjects of methodological discussion in international working groups is the question of how far such investment chains should be looked through. There is now a consensus that - even if the investment chain is (much) longer - the economy of the first operating unit should be considered the UHE. However, there is currently a lively debate as to what is meant by an operational unit. Or, in other words, how the operational unit should be operationalized.
Although this approach has only recently received greater attention and is therefore only just finding its way into international manuals, Deutsche Bundesbank has many years of experience in collecting, compiling, and disseminating UHE statistics in Germany.
On the basis of this experience and the available data, the presentation will pick up selected issues from international working groups (e.g. looking through holding companies vs. looking through SPEs only) and discuss possible ways forward.