Is Competition for FDI Bad for Regional Welfare?

Arbeitspapier

We investigate the impact on regional welfare of policy competition for FDI when a multinational firm can strategically react to differences in statutory corporate tax rates and shift taxable profits to lower-tax jurisdictions. We show that competing governments may have an incentive to tax discriminate between domestic and multinational firms even in the presence of profit shifting opportunities for the latter. In particular, tax competition leads to higher welfare for the region as a whole than lump-sum subsidy competition when the difference in statutory corporate tax rates and/or their average is high enough. We also find that policy competition increases regional welfare by changing the firm's investment decision when profit shifting motivations might induce the firm to locate in the least profitable country.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Quaderni - Working Paper DSE ; No. 680

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multinational Firms; International Business ; Business Taxes and Subsidies including sales and value-added (VAT) ; Tax Evasion and Avoidance ; Fiscal Policies and Behavior of Economic Agents: Firm ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Amerighi, Oscar ; De Feo, Giuseppe
• Ereignis: Veröffentlichung
• (wer): Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
• (wo): Bologna
• (wann): 2009

Weitere Informationen

• DOI: doi:10.6092/unibo/amsacta/4564
• Handle: http://hdl.handle.net/10419/159521
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ