Competition for FDI and profit shifting: On the effects of subsidies and tax breaks

Giuseppe De Feo and Oscar Amergighi

No 2013-105, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: We investigate competition for FDI within a region when a foreign multinational rm can profitably exploit differences in statutory corporate tax rates by shifting taxable pro ts 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 pro t shifting motivations induce the rm to locate in the (before tax) least pro table country.

Keywords: Policy competition for FDI; Profit shifting; Tax discrimination (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-int and nep-pbe
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Related works:
Journal Article: Competition for FDI and Profit Shifting: On the Effects of Subsidies and Tax Breaks (2014)
Working Paper: Competition for FDI and profit shifting: On the effects of subsidies and tax breaks (2013)
Working Paper: Competiton for FDI and profit shifting: on the effects of subsidies and tax breaks (2013)
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