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.

    ORCID iDs

    Amerighi, Oscar and De Feo, Giuseppe ORCID logoORCID: https://orcid.org/0000-0002-2085-1756;
    • Item type:Monograph(Discussion paper)
      ID code:68085
      Dates:
      Date
      Event
      October 2013
      Published
      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:25 Jul 2021 01:50
      URI:https://strathprints.strath.ac.uk/id/eprint/68085
    CORE (COnnecting REpositories)