Taxing Foreign Profits with International Mergers and Acquisitions

Johannes Becker and Clemens Fuest

No 719, Working Papers from Oxford University Centre for Business Taxation

Abstract: A large part of border crossing investment takes the form of international mergers and acquisitions. In this paper, we ask how optimal repatriation tax systems look like in a world where investment involves a change of ownership, rather than a reallocation of real capital. We find that the standard results of international taxation do not carry over to the case of international mergers and acquisitions. The deduction system is no longer optimal from a national perspective and the foreign tax credit system fails to ensure global optimality. The tax exemption system is optimal if ownership advantage is a public good within the multinational firm. But the cross border cash flow tax system dominates the exemption system in terms of optimality properties.

Keywords: Corporate Taxation; Mergers and Acquisitions; International Capital Flows (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: TAXING FOREIGN PROFITS WITH INTERNATIONAL MERGERS AND ACQUISITIONS (2010)
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