Competition for FDI and Profit Shifting: On the Effects of Subsidies and Tax Breaks

Oscar, Amerighi; DE FEO, Giuseppe

doi:10.1628/001522114X684510

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We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits to lower-tax jurisdictions. In such a framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition can also increase overall surplus by changing the firm's investment decision when profit shifting motivations induce the firm to locate in the (before tax) least profitable country.

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Titolo:	Competition for FDI and Profit Shifting: On the Effects of Subsidies and Tax Breaks
Autori:	Oscar Amerighi DE FEO, GIUSEPPE mostra contributor esterni nascondi contributor esterni
Data di pubblicazione:	2014
Rivista:	FINANZARCHIV
Abstract:	We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits to lower-tax jurisdictions. In such a framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition can also increase overall surplus by changing the firm's investment decision when profit shifting motivations induce the firm to locate in the (before tax) least profitable country.
Handle:	http://hdl.handle.net/11571/985465
Appare nelle tipologie:	1.1 Articolo in rivista

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