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Source versus residence based taxation with international mergers and acquisitions

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  • Becker, Johannes
  • Fuest, Clemens

Abstract

This paper analyses tax competition and tax coordination in a model where capital flows occur in the form of mergers and acquisitions, rather than greenfield investment. In this framework, we show that differences in residence based taxes do not necessarily distort international ownership patterns. Moreover, tax competition yields globally efficient levels of source based corporate income taxes if residence based taxes on capital income are absent. In contrast, in the presence of residence based taxes on dividends, source based corporate income taxes are inefficiently high. The widespread view that tax coordination is less urgent if residence based taxes are available may therefore be misguided.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 1 ()
Pages: 28-40

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:1:p:28-40

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Corporate taxation; Tax competition; Mergers and Acquisitions;

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References

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  2. Fuest, Clemens & Huber, Bernd & Mintz, Jack, 2005. "Capital Mobility and Tax Competition," Foundations and Trends(R) in Microeconomics, now publishers, vol. 1(1), pages 1-62, December.
  3. Swenson, Deborah L., 1994. "The impact of U.S. tax reform on foreign direct investment in the United States," Journal of Public Economics, Elsevier, vol. 54(2), pages 243-266, June.
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  5. Becker, Johannes & Fuest, Clemens, 2011. "Tax competition -- Greenfield investment versus mergers and acquisitions," Regional Science and Urban Economics, Elsevier, vol. 41(5), pages 476-486, September.
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Citations

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Cited by:
  1. Andreas Haufler & Christian Schulte, 2011. "Merger policy and tax competition: the role of foreign firm ownership," International Tax and Public Finance, Springer, vol. 18(2), pages 121-145, April.
  2. Sjögren, Anna, 2010. "Graded Children – Evidence of Longrun Consequences of School Grades from a Nationwide Reform," Working Paper Series 839, Research Institute of Industrial Economics.
  3. Johannes Becker & Marco Runkel, 2010. "Corporate tax regime and international allocation of ownership," Working Papers 1010, Oxford University Centre for Business Taxation.
  4. Katrin Hohler, 2013. "The introduction of the exemption system for foreign profits and its effects on international acquisitions – the UK and Japan regaining international tax competitiveness?," Journal of Applied Accounting Research, Emerald Group Publishing, vol. 14(3), pages 224-247.
  5. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2010. "Ownership Efficiency and Tax Advantages: The Case of Private Equity Buyouts," Working Paper Series 841, Research Institute of Industrial Economics.
  6. Michael Devereux & Clemens Fuest & Ben Lockwood, 2013. "The Taxation of Foreign Profits: a Unified View," Working Papers 1303, Oxford University Centre for Business Taxation.
  7. Siggelkow, Benjamin Florian, 2013. "Tax Competition and Double Tax Treaties with Mergers and Acquisitions," MPRA Paper 49371, University Library of Munich, Germany.

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