Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/88107 
Year of Publication: 
2013
Series/Report no.: 
Freiburger Diskussionspapiere zur Ordnungsökonomik No. 13/11
Publisher: 
Albert-Ludwigs-Universität Freiburg, Institut für Allgemeine Wirtschaftsforschung, Abteilung für Wirtschaftspolitik, Freiburg i. Br.
Abstract: 
Repatriation taxes reduce the competitiveness of multinational firms from tax credit countries when bidding for targets in low tax countries. This comparative disadvantage with respect to bidders from exemption countries violates ownership neutrality, which results in production inefficiency due to second-best ownership structures. This paper empirically estimates the magnitude of these effects. The abolishment of repatriation taxes in Japan and in the U.K. in 2009 has increased the number of acquisitions abroad by Japanese and British firms by 31.9% and 3.9 %, respectively. A similar policy switch in the U.S. is simulated to increase the number of U.S. cross-border acquisition by 17.1 %. We estimate the yearly gain in efficiency to be around 525 million dollar due to the Japanese reform and 13.5 million dollar due to the U.K. reform. Simulating such a reform for the U.S. results in a yearly efficiency gain of 1134 million dollar.
Subjects: 
international mergers and acquisitions
business taxation
repatriation taxes
ownership neutrality
JEL: 
H25
G34
Document Type: 
Working Paper

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