Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/113768
Authors: 
Kalamov, Zarko
Runkel, Marco
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5436
Abstract: 
This article investigates a tax competition model where countries compete for capital and profits of multinational enterprises (MNEs) through statutory tax rates and cross-border loss-offset provisions, which allow a transfer of foreign subsidiaries’ losses to the parent company. A joint implementation of full cross-border loss-relief is welfare maximizing, because it ensures production efficiency and no profit shifting in equilibrium. Local governments choose zero level of the loss-relief in a noncooperative equilibrium, if only capital is mobile and relax the loss-offset, when MNEs engage in profit shifting. Therefore, allowing multinationals to undertake international tax planning activities may be welfare-improving in our model.
Subjects: 
cross-border loss-offset
tax competition
profit shifting
JEL: 
H32
F23
Document Type: 
Working Paper

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