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Tax competition -- Greenfield investment versus mergers and acquisitions

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  • Becker, Johannes
  • Fuest, Clemens

Abstract

In this paper, we analyse tax competition in a model where investor firms have the choice between two types of investment, greenfield investment and mergers and acquisitions. We show that the coexistence of these two types of investment intensifies tax competition in comparison to the case where there is only greenfield investment. If a specific tax on acquisitions is available, this result changes. Then, tax competition is mitigated compared to the pure greenfield case. The existence of an acquisition tax may even lead to corporate overtaxation.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 41 (2011)
Issue (Month): 5 (September)
Pages: 476-486

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Handle: RePEc:eee:regeco:v:41:y:2011:i:5:p:476-486

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Keywords: Corporate taxation Mergers and acquisitions Tax competition;

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Citations

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Cited by:
  1. Becker, Johannes & Fuest, Clemens, 2011. "Source versus residence based taxation with international mergers and acquisitions," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 28-40, February.
  2. Sjögren, Anna, 2010. "Graded children – evidence of longrun consequences of school grades from a nationwide reform," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2010:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Nils Herger & Christos Kotsogiannis & Steve McCorriston, 2011. "International Taxation and FDI Strategies: Evidence From US Cross-Border Acquisitions," Discussion Papers, Exeter University, Department of Economics 1109, Exeter University, Department of Economics.
  4. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2010. "Ownership Efficiency and Tax Advantages: The Case of Private Equity Buyouts," Working Paper Series, Research Institute of Industrial Economics 841, Research Institute of Industrial Economics.
  5. Peter Egger & Valeria Merlo & Martin Ruf & Georg Wamser, 2012. "Consequences of the New UK Tax Exemption System: Evidence from Micro-level Data," CESifo Working Paper Series 3942, CESifo Group Munich.
  6. Hebous, Shafik & Ruf, Martin & Weichenrieder, Alfons J., 2011. "The Effects Of Taxation On The Location Decision Of Multinational Firms: M&A Versus Greenfield Investments," National Tax Journal, National Tax Association, vol. 64(3), pages 817-38, September.
  7. Chia Sun, 2014. "A conceptual framework for R&D strategic alliance assessment for Taiwan’s biotechnology industry," Quality & Quantity: International Journal of Methodology, Springer, Springer, vol. 48(1), pages 259-279, January.
  8. Shafik Hebous & Martin Ruf & Alfons Weichenrieder, 2010. "The Effects of Taxation on the Location Decision of Multinational Firms: M&A vs. Greenfield Investments," CESifo Working Paper Series 3076, CESifo Group Munich.

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