Tax Competition When Firms Choose Their Organizational Form: Should Tax Loopholes for Multinationals Be Closed?

By Sam Bucovetsky, Andreas Haufler. Social Science Research Network, 2005

178 citations recorded by the source corpus.

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 policy initiatives that aim at a ban on preferential tax regimes and at reducing the profit shifting opportunities for multinational firms.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/d80afee16e4a32dcca99873a32db28328aeaa5f4

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Andreas Haufler
2. M. Runkel
3. M. Smart
4. Qing Hong

In Economics and Econometrics

1. Andreas Haufler
2. M. Runkel
3. M. Smart
4. Qing Hong
5. R. M. Bird
6. J. Fox

In Political Science and International Relations

1. Andreas Haufler
2. M. Runkel
3. M. Smart
4. Qing Hong
5. R. M. Bird
6. J. Fox

Citations in the corpus

• Firms' Financial Choices and Thin Capitalization Rules under Corporate Tax Competition (2012, background): “Second, our analysis also relates to the theoretical literature that investigates whether the abolition of tax preferences for mobile tax bases raises or reduces tax revenues and welfare in the competing countries (Janeba and Peters, 1999; Keen, 2001; Janeba and Smart, 2003; Haupt and Peters, 2005; ”
• In Praise of Tax Havens: International Tax Planning and Foreign Direct Investment (2007, background): “Bucovetsky and Haufler (2008) also consider a model of income shifting and investment by multinationals. They examine the implications of tax sheltering for the decisions of firms to use multinational organizational structures, and for the potential for international tax cooperation. Since the first”