Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104139
Authors: 
Stöwhase, Sven
Year of Publication: 
2004
Series/Report no.: 
Munich Discussion Paper 2004-23
Abstract: 
This paper analyses capital tax competition between jurisdictions of different size when multinational firms can shift some fraction of their tax base between them. For the case of revenue maximizing governments, we show that introducing profit shifting will not generally increase downward pressure on tax rates. We find that profit shifting decreases the tax-base elasticity of the low tax jurisdiction while increasing the elasticity of the high tax jurisdiction. Therefore, by the direct (impact) effect, tax rates will converge as a result of additional profit shifting opportunities. In general equilibrium, however, tax rates may decrease or increase in both jurisdictions.
Subjects: 
tax competition
asymmetric countries
profit shifting
multinational enterprises
JEL: 
F23
H25
H26
H32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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