IDEAS home Printed from https://ideas.repec.org/p/cor/louvrp/2202.html

The proximity-concentration trade-off with profit shifting

Author

Listed:
  • AMERIGHI, Oscar
  • PERALTA, Susana

Abstract

We study a firm which serves two unequally-sized jurisdictions and must choose where to locate its first production plant, and whether to open a second plant to serve the other market through local sales rather than exports. An exporter pays taxes only to the region where it locates its single production plant. A double-plant multi-regional firm pays taxes in both regions, but may shift taxable profits across them, at a cost. We show that the standard trade-off between fixed and trade costs is modified, depending on both the average tax of, and the tax difference between, the two regions. We also find that increased market size asymmetry may make it more likely that the firm builds a second production plant. From a total-welfare viewpoint, it is always desirable to control the firm's tax avoidance ability when the double-plant structure is given. However, the fact that the firm may react to corporate taxation by changing its production structure may be a reason not to curb profit-shifting activities.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • AMERIGHI, Oscar & PERALTA, Susana, 2010. "The proximity-concentration trade-off with profit shifting," LIDAM Reprints CORE 2202, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2202
    DOI: 10.1016/j.jue.2010.03.004
    Note: In : Journal of Urban Economics, 68(1), 90-101, 2010
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jean Hindriks & Susana Peralta & Shlomo Weber, 2014. "Local Taxation of Global Corporation: A Simple Solution," Annals of Economics and Statistics, GENES, issue 113-114, pages 37-65.
    2. Hayato Kato & Hirofumi Okoshi, 2022. "Economic Integration And Agglomeration Of Multinational Production With Transfer Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1325-1355, August.
    3. Jie Ma & Pascalis Raimondos, 2015. "Competition for FDI and Profit Shifting," CESifo Working Paper Series 5153, CESifo.
    4. Gerlinde Verbist & Francesco Figari, 2014. "The Redistributive Effect and Progressivity of Taxes Revisited: An International Comparison across the European Union," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(3), pages 405-429, September.
    5. Jean Hindriks & Yukihiro Nishimura, 2021. "Taxing multinationals: The scope for enforcement cooperation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(3), pages 487-509, June.
    6. Kristian Behrens & Susana Peralt & Pierre M. Picard, 2014. "Transfer Pricing Rules, OECD Guidelines, and Market Distortions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 650-680, August.
    7. Kenji Matsui, 2012. "Auditing internal transfer prices in multinationals under monopolistic competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 800-818, December.
    8. Hirofumi OKOSHI, 2021. "Innovation for Tax Avoidance: Product Differentiation and the Arm's Length Principle," Discussion papers 21038, Research Institute of Economy, Trade and Industry (RIETI).
    9. Hindriks, Jean & Nishimura, Yukihiro, 2021. "Why Minimum Corporate Income Taxation Can Make the High-Tax Countries Worse off: the Compliance Dilemma," LIDAM Discussion Papers CORE 2021010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. HINDRIKS, Jean & nishimura, YUKIHIRO, 2014. "International tax leadership among asymmetric countries," LIDAM Discussion Papers CORE 2014028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvrp:2202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alain GILLIS (email available below). General contact details of provider: https://edirc.repec.org/data/coreebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.