Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks

Amerighi, Oscar and De Feo, Giuseppe (2013) Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks. Discussion paper. University of Strathclyde, Glasgow.

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    Abstract

    We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits 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 profit shifting motivations induce the firm to locate in the (before tax) least profitable country.

    Creators(s): Amerighi, Oscar and De Feo, Giuseppe ORCID logoORCID: https://orcid.org/0000-0002-2085-1756;
    Item type:Monograph(Discussion paper)
    ID code:68085
    Notes:Published as a paper within the Discussion Papers in Economics, No. 13-26 (2013)
    Keywords:policy competition for FDI, profit shifting, tax discrimination, Economic Theory, Finance, Economics, Econometrics and Finance(all)
    Subjects:Social Sciences > Economic Theory
    Social Sciences > Finance
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:29 May 2019 09:08
    Last modified:26 Jan 2020 02:59
    URI:https://strathprints.strath.ac.uk/id/eprint/68085
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