Tax competition when firms choose their organizational form: Should tax loopholes for multinationals be closed?
b"We analyze a sequential game between two symmetric countries when\\nfirms can invest in a multinational structure that confers tax\\nsavings. Governments are able to commit to long-run tax\\ndiscrimination policies before firms' decisions are made and\\nbefore statutory capital tax rates are chosen non-cooperatively.\\nWhether a coordinated reduction in the tax preferences granted to\\nmobile firms is beneficial or harmful for the competing countries\\ndepends critically on the elasticity with which the firms'\\norganizational structure responds to tax discrimination\\nincentives. The model can be applied to recent policy initiatives\\nthat aim at a ban on preferential tax regimes and at reducing the\\nprofit shifting opportunities for multinational firms."