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Taxes and the Location of Targets

Author

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  • Arulampalam, Wiji

    (Department of Economics, University of Warwick ; IZA ; Oslo Fiscal Studies ; Oxford Centre for Business Taxation)

  • Devereux, Michael P.

    (Oxford Centre for Business Taxation)

  • Liberini, Federica

    (MTEC, ETH Zurich)

Abstract

We use firm-level data to investigate the impact of taxes on the international location of targets in M & A allowing for heterogeneous responses by companies. The statutory tax rate in the target country is found to have a negative impact on the probability of an acquisition in that country. In addition, the estimated size of the effect is found to depend on whether (i) acquirer is a domestic or a multinational enterprise ; (ii) the acquisition is domestic or cross-border ; and (iii) the acquirer's country has a worldwide or territorial tax system.

Suggested Citation

  • Arulampalam, Wiji & Devereux, Michael P. & Liberini, Federica, 2017. "Taxes and the Location of Targets," The Warwick Economics Research Paper Series (TWERPS) 1135, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:1135
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    Cited by:

    1. Harry Grubert & Rosanne Altshuler, 2013. "Fixing the System: An Analysis of Alternative Proposals for the Reform of International Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 671-712, September.
    2. Feld, Lars P. & Ruf, Martin & Scheuering, Uwe & Schreiber, Ulrich & Voget, Johannes, 2016. "Repatriation taxes and outbound M&As," Journal of Public Economics, Elsevier, vol. 139(C), pages 13-27.
    3. Simon Behrendt & Georg Wamser, 2018. "Tax-Response Heterogeneity and the Effects of Double Taxation Treaties on the Location Choices of Multinational Firms," CESifo Working Paper Series 6869, CESifo Group Munich.

    More about this item

    Keywords

    Multinational enterprises ; cross-border expansion ; target choice ; corporation income tax ; mixed logit;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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