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Tax competition -- Greenfield investment versus mergers and acquisitions

Listed author(s):
  • Becker, Johannes
  • Fuest, Clemens

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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File URL: http://www.sciencedirect.com/science/article/pii/S0166046211000342
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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