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Optimal tax policy when firms are internationallly mobile

Author

Listed:
  • Johannes Becker

    (Oxford University Centre for Business Taxation)

  • Clemens Fuest

    (Oxford University Centre for Business Taxation)

Abstract

The standard tax theory result that investment should not be distorted is based on the assumption that profits are locally bound. In this paper we analyze the optimal tax policy in a model where firms are internationally mobile. We show that the optimal policy response to increasing firm mobility may be taxation, subsidization or non-distortion of the marginal investment, depending on whether the mobile firms are more or less profitable than the average firm in the economy. Our findings may contribute to understanding recent tax policy developments in many OECD countries.

Suggested Citation

  • Johannes Becker & Clemens Fuest, 2009. "Optimal tax policy when firms are internationallly mobile," Working Papers 0907, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:0907
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate taxes; Optimal Tax Policy; Multinational Firms;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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