Arbeitspapier

Tax competition when firms choose their organizational form: Should tax loopholes for multinationals be closed?

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We analyze a sequential game between two symmetric countries when firms can invest in a multinational structure that confers tax savings. Governments are able to commit to long-run tax discrimination policies before firms' decisions are made and before statutory capital tax rates are chosen non-cooperatively. Whether a coordinated reduction in the tax preferences granted to mobile firms is beneficial or harmful for the competing countries depends critically on the elasticity with which the firms' organizational structure responds to tax discrimination incentives. The model can be applied to recent policy initiatives that aim at a ban on preferential tax regimes and at reducing the profit shifting opportunities for multinational firms.

Language: Englisch

Bibliographic citation: Series: Munich Discussion Paper ; No. 2005-23

Classification: Wirtschaft
State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
Multinational Firms; International Business

Subject: tax competition
multinational firms
preferential treatment

Event: Geistige Schöpfung

(who): Bucovetsky, Sam
Haufler, Andreas

Event: Veröffentlichung

(who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät

(where): München

(when): 2005

DOI: doi:10.5282/ubm/epub.729

Handle: http://hdl.handle.net/10419/104174

URN: urn:nbn:de:bvb:19-epub-729-4

Last update: 10.03.2025, 11:44 AM CET

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Object type

Arbeitspapier

Associated

Bucovetsky, Sam
Haufler, Andreas
Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät

Time of origin

2005

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