Wages and International Tax Competition
Sebastian Krautheim () and
Tim Schmidt-Eisenlohr ()
No 3867, CESifo Working Paper Series from CESifo Group Munich
Rent-sharing between firm owners and workers is a robust empirical finding. If workers bargain with firms, information on the actual surplus is essential. When the firm can use profit shifting to create private information on the surplus, it can thereby reduce its wage bill. We study how rent sharing and this wage incentive for profit shifting affect the ability of governments to tax multinational companies in a standard model of international tax competition. We find that if firms only have a tax incentive for profit shifting, rent-sharing decreases the competitive pressure on the large country and leads to higher equilibrium tax rates. When we allow for the wage channel, this result can change. If the wage incentive is sufficiently strong, rent-sharing increases the competitive pressure on the large country, implying a lower equilibrium tax rate.
Keywords: wages; tax competition; rent-sharing; profit shifting; tax havens; private information (search for similar items in EconPapers)
JEL-codes: F23 H25 H73 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Journal Article: Wages and International Tax Competition (2016)
Working Paper: Wages and International Tax Competition (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3867
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().