Merger Policy and Tax Competition

Published: Nov. 21, 2007, 11 a.m.

b'In many situations governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy\\nproduction-based taxes. We find that whether national or international mergers are more likely to be enacted in the presence of nationally optimal tax policies depends crucially on the ownership structure of firms. When all\\nfirms are owned domestically in the pre-merger situation, non-cooperative tax policies are more efficient in the national merger case and smaller synergy effects are needed for this type of merger to be proposed and cleared. These results are reversed when there is a high degree of foreign\\nfirm ownership prior to the merger.'