EconPapers    
Economics at your fingertips  
 

Heterogeneous firms, ‘profit shifting’ FDI and international tax competition

Sebastian Krautheim and Tim Schmidt-Eisenlohr

Journal of Public Economics, 2011, vol. 95, issue 1, 122-133

Abstract: Larger firms are more likely to use tax haven operations to exploit international tax differences. We study tax competition between a large country and a tax haven. In the large country, heterogeneous firms operate under monopolistic competition and can choose to shift profits abroad. We show that a higher degree of firm heterogeneity (a mean-preserving spread of the cost distribution) increases the degree of tax competition, i.e. it decreases the equilibrium tax rate of the large country, leads to higher outflows of its tax base and thus decreases its equilibrium tax revenues. Similar effects hold for a higher substitutability across varieties.

Keywords: Heterogeneous firms; Tax competition; Profit shifting; Tax havens (search for similar items in EconPapers)
JEL-codes: F23 H25 H73 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (74)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272710001519
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Heterogeneous firms, 'profit shifting' FDI and international tax competition (2011) Downloads
Working Paper: Heterogeneous Firms, 'Profit Shifting' FDI and International Tax Competition (2009) Downloads
Working Paper: Heterogeneous firms, "Profit Shifting" FDI and international tax competition (2009) Downloads
Working Paper: Heterogeneous Firms, "Profit Shifting" FDI and International Tax Competition (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:1:p:122-133

DOI: 10.1016/j.jpubeco.2010.10.008

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-31
Handle: RePEc:eee:pubeco:v:95:y:2011:i:1:p:122-133