IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Competition for FDI and profit shifting: On the effects of subsidies and tax breaks

  • De Feo, Giuseppe
  • Amergighi, Oscar

We investigate competition for FDI within a region when a foreign multinational rm can profitably exploit differences in statutory corporate tax rates by shifting taxable pro ts to lower-tax jurisdictions. In such framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition is also preferable from an efficiency point of view (overall surplus) by changing the firm's investment decision when pro t shifting motivations induce the rm to locate in the (before tax) least pro table country.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10943/530
Download Restriction: no

Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2013-105.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:edn:sirdps:530
Contact details of provider: Postal:
31 Buccleuch Place, EH8 9JT, Edinburgh

Phone: +44(0)1316508361
Fax: +44(0)1316504514
Web page: http://www.sire.ac.uk
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Haufler, Andreas & Wooton, Ian, 2006. "The effects of regional tax and subsidy coordination on foreign direct investment," Munich Reprints in Economics 19926, University of Munich, Department of Economics.
  2. Jean, HINDRIKS & Susana, PERALTA & Sholmo, WEBER, 2006. "Competing in taxes and investment under fiscal equalization," Discussion Papers (ECON - Département des Sciences Economiques) 2006062, Université catholique de Louvain, Département des Sciences Economiques.
  3. Ferrett, Ben & Wooton, Ian, 2005. "Competing for a Duopoly: International Trade and Tax Competition," CEPR Discussion Papers 5379, C.E.P.R. Discussion Papers.
  4. AMERIGHI, Oscar, . "Transfer pricing and enforcement policy in oligopolistic markets," CORE Discussion Papers RP 2203, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June.
  6. Janeba, Eckhard & Smart, Michael, 2003. "Is Targeted Tax Competition Less Harmful Than Its Remedies?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 259-80, May.
  7. Bjorvatn, Kjetil & Eckel, Carsten, 2006. "Policy competition for foreign direct investment between asymmetric countries," European Economic Review, Elsevier, vol. 50(7), pages 1891-1907, October.
  8. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  9. Bartelsman, Eric J. & Beetsma, Roel M. W. J., 2003. "Why pay more? Corporate tax avoidance through transfer pricing in OECD countries," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2225-2252, September.
  10. Michael Devereux & Simon Loretz, 2012. "What do we know about corporate tax competition?," Working Papers 1229, Oxford University Centre for Business Taxation.
  11. Thiess Buettner & Martin Ruf, 2007. "Tax incentives and the location of FDI: Evidence from a panel of German multinationals," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 151-164, April.
  12. Ferrett, Ben & Wooton, Ian, 2006. "Tax Competition and the International Distribution of Firm Ownership: An Invariance Result," CEPR Discussion Papers 5984, C.E.P.R. Discussion Papers.
  13. Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 475-492, August.
  14. King, I. & McAfee, R.P. & Welling, L., 1990. "Industrial Blackmail," Papers 130, Calgary - Department of Economics.
  15. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
  16. Chiesa, Gabriella & Denicolò, Vincenzo, 2009. "Trading with a common agent under complete information: A characterization of Nash equilibria," Journal of Economic Theory, Elsevier, vol. 144(1), pages 296-311, January.
  17. James R. Hines & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 149-182.
  18. Bucovetsky, Sam & Haufler, Andreas, 2008. "Tax competition when firms choose their organizational form: Should tax loopholes for multinationals be closed," Journal of International Economics, Elsevier, vol. 74(1), pages 188-201, January.
  19. C. Dembour, 2008. "Competition for Business Location: A Survey," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 89-111, June.
  20. Heckemeyer, Jost H. & Overesch, Michael, 2013. "Multinationals' profit response to tax differentials: Effect size and shifting channels," ZEW Discussion Papers 13-045, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  21. Kind, Hans Jarle & Schjelderup, Guttorm & Ulltveit-Moe, Karen-Helene, 2001. "Corporate Taxation, Multinational Enterprise and Economic Integration," CEPR Discussion Papers 2753, C.E.P.R. Discussion Papers.
  22. Fumagalli, Chiara, 2003. "On the welfare effects of competition for foreign direct investments," European Economic Review, Elsevier, vol. 47(6), pages 963-983, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:edn:sirdps:530. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gina Reddie)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.