Template-Type: ReDIF-Paper 1.0
Author-Name: Oscar Amerighi
Author-Name-First: Oscar
Author-Name-Last: Amerighi
Author-Email: oscar.amerighi@enea.it
Author-Workplace-Name: Universita di Bologna
Author-Name: Giuseppe De Feo
Author-Name-First: Giuseppe
Author-Name-Last: De Feo
Author-Email: giuseppe.defoe@strath.ac.uk
Author-Workplace-Name: Department of Economics, University of Strathclyde
Title: Competiton for FDI and profit shifting:  on the effects of subsidies and tax breaks
Abstract: We investigate competition for FDI within a region when a foreign multinational firm can profitably  exploit differences in statutory corporate tax rates by shifting taxable profits 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 profit  shifting motivations induce the firm to locate in the (before tax) least profitable country.
Length: 29 pages
Creation-Date: 2013-11
Revision-Date: 
Publication-Status: Published
File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/2013/13-26FINAL.pdf
File-Format: Application/pdf
Number: 1326
Classification-JEL: H25, H26, H32, H73, F23
Keywords: Policy competition for FDI; profit shifting; tax discrimination
Handle: RePEc:str:wpaper:1326