Optimal Taxation of International Mergers & Acquisitions

32 Pages Posted: 12 Feb 2009 Last revised: 7 Nov 2012

Date Written: April 1, 2009

Abstract

If interest income is subject to tax, the taxation of business income from international mergers & acquisitions as well as international greenfield investments is globally optimal if economic depreciations are permitted as tax-deductible expenses, investors receive a credit for foreign taxes paid (tax credit method), and business income is taxed at the uniform income tax rate. It is nationally optimal with full taxation after deduction.

This optimality result prevails with historical cost depreciation for international greenfield investments, but not for international mergers & acquisitions.

Cash-flow taxation of international mergers & acquisitions and greenfield investment is globally optimal with a tax credit method and nationally optimal with full taxation after deduction.

Keywords: Optimal International Taxation, Mergers and Acquisitions, Foreign Direct Investment, Business Taxation

JEL Classification: H25, H21, F23

Suggested Citation

Ruf, Martin, Optimal Taxation of International Mergers & Acquisitions (April 1, 2009). Available at SSRN: https://ssrn.com/abstract=1341664 or http://dx.doi.org/10.2139/ssrn.1341664

Martin Ruf (Contact Author)

University of Tübingen ( email )

Nauklerstraße 47
Tübingen, D-72076
Germany

HOME PAGE: http://www.uni-tuebingen.de/wiwi/steuern

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