Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues

Pehr-Johan Norbäck, Lars Persson and Jonas Vlachos

No 663, Working Paper Series from Research Institute of Industrial Economics

Abstract: We find that reduced foreign corporate taxes may lead to inefficient foreign acquisitions if complementarities between foreign and domestic assets are low, and to efficient foreign acquisitions if such complementarities are high. Moreover, with large complementarities, foreign acquisitions can increase domestic tax revenues. The reason is that in the bidding competition between the foreign firms, all benefits from the acquisition, including tax advantages and evaded taxes, are competed away and captured by the domestic seller which, in turn, pays capital gains tax on the proceeds. Technical issues in the tax code, such as the treatment of goodwill deductibility, is also shown to crucially affect the pattern of foreign acquisitions.

Keywords: Tax Competition; Ownership; Tax Revenues; FDI; M&As (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2006-03-09
New Economics Papers: this item is included in nep-acc, nep-com, nep-cse and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0663

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