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

Oscar Amerighi, Giuseppe De Feo

Research output: Working paperDiscussion paper

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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

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Tax competition
Subsidies
Corporate tax rates
Tax
Profit shifting
Investment decision
Jurisdiction
Multinational firms
Firm investment
Surplus
Profit

Keywords

  • policy competition for FDI
  • profit shifting
  • tax discrimination

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). Glasgow: University of Strathclyde.
Amerighi, Oscar ; De Feo, Giuseppe. / Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks. 26. ed. Glasgow : University of Strathclyde, 2013. pp. 1-27
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Amerighi, O & De Feo, G 2013 'Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks' 26 edn, University of Strathclyde, Glasgow, pp. 1-27.

Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks. / Amerighi, Oscar; De Feo, Giuseppe.

26. ed. Glasgow : University of Strathclyde, 2013. p. 1-27.

Research output: Working paperDiscussion paper

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Amerighi O, De Feo G. Competition for FDI and Profit Shifting on the Effects of Subsidies and Tax Breaks. 26 ed. Glasgow: University of Strathclyde. 2013 Oct, p. 1-27.