Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159521
Authors: 
Amerighi, Oscar
De Feo, Giuseppe
Year of Publication: 
2009
Series/Report no.: 
Quaderni - Working Paper DSE 680
Abstract: 
We investigate the impact on regional welfare of policy competition for FDI when a multinational firm can strategically react to differences in statutory corporate tax rates and shift taxable profits to lower-tax jurisdictions. We show that competing governments may have an incentive to tax discriminate between domestic and multinational firms even in the presence of profit shifting opportunities for the latter. In particular, tax competition leads to higher welfare for the region as a whole than lump-sum subsidy competition when the difference in statutory corporate tax rates and/or their average is high enough. We also find that policy competition increases regional welfare by changing the firm's investment decision when profit shifting motivations might induce the firm to locate in the least profitable country.
JEL: 
F23
H25
H26
H32
H73
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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