Tax Competition when Firms Choose their Organizational Form: Should Tax Loopholes for Multinationals be Closed?

Sam Bucovetsky and Andreas Haufler

No 1625, CESifo Working Paper Series from CESifo

Abstract: 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.

Keywords: tax competition; multinational firms; preferential treatment (search for similar items in EconPapers)
JEL-codes: F23 H73 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Tax competition when firms choose their organizational form: Should tax loopholes for multinationals be closed (2008)
Working Paper: Tax competition when firms choose their organizational form: Should tax loopholes for multinationals be closed? (2008)
Working Paper: Tax competition when firms choose their organizational form: Should tax loopholes for multinationals be closed? (2005)
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