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IPS307 Tjeerd Jellema et al.
expression of this could be a FDI size indicator, as shown in Figure 1, which is
calculated as the natural logarithm of the ratio of total FDI liability positions
to GDP. Positive numbers indicate that FDI liabilities exceed GDP, this can be
observed for seven countries. In Figure 1 the SPE concentrating countries are
labelled by a diamond and countries that reported the presence of SPEs in
[ECB (2017)] are labelled by a small circle.

In a European context, the establishment of SPEs structured to manage the
tax liabilities and/or financing requirement of large MNE’s requires highly
specialised services. These are typically provided by legal professionals, tax
consultants, specializing in international, European and home country law as
well as financial sector specialists. Often these are provided by multinational
consulting firms, with international staff, able to call on national expertise as
and when needed. It is therefore of interest to consider whether SPE hosting
countries would have a well-developed legal, financial and consulting services
sector. Figure 1 shows the share of employment in financial and professional
services as percentage of total employment. The indicator has been
normalised against the EU average of 8.5%, countries with negative scores
have less than the EU average, and countries with positive scores exceed the
European average. All of the countries that we associate with concentrations
of SPEs have positive scores exceeding 1, with the exception of Hungary. From
the OECD restrictiveness indicator [OECD 2019a] we learn that European SPE
concentrating countries have no restrictions with regards to FDI in the financial
and professional sectors i.e. are fully open to international consulting firms.
One final and very compelling reason by which European countries may
attract SPEs, and the first cited reason in the macro-economic statistics
manuals [See for instance IMF 2009 para 4.50], is the provision of tax
advantages. Often, these tax advantages are available to large corporations
through the establishment of complex corporate legal structures in several
countries in combination, rather than in single countries in isolation.
Nonetheless, overall corporate income tax rates provide corporations with

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