Tax competition and the international distribution of firm ownership: an invariance result
journal contributionposted on 07.12.2016, 14:52 authored by Ben FerrettBen Ferrett, Ian Wooton
How does the international distribution of firm ownership affect the outcomes of tax/subsidy competition for mobile plants? As corporate ownership becomes increasingly globalised, this question becomes increasingly important for policy. We prove a strong invariance result in the context of the tax/subsidy competition between two host countries for a monopoly firm’s plant. Both the equilibrium plant location and the equilibrium tax/subsidy offers are independent of the international distribution of the firm’s ownership. The reason is that the tax/subsidy competition equalises the firm’s post-tax profits across countries, making owners of capital indifferent towards the location of production.
- Business and Economics