Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks

Oscar Amerighi, Giuseppe De Feo

Research output: Working paperDiscussion paper

2 Downloads (Pure)

Abstract

We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits to lower-tax jurisdictions. In such framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition is also preferable from an efficiency point of view (overall surplus) by changing the firm’s investment decision when profit shifting motivations induce the firm to locate in the (before tax) least profitable country.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-27
Number of pages29
Volume13
Publication statusPublished - Oct 2013

Keywords

  • policy competition for FDI
  • profit shifting
  • tax discrimination

Fingerprint Dive into the research topics of 'Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks'. Together they form a unique fingerprint.

  • Cite this

    Amerighi, O., & De Feo, G. (2013). Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks. (26 ed.) (pp. 1-27). University of Strathclyde.