Effects of Territorial and Worldwide Corporation Tax Systems on Outbound M&As

31 Pages Posted: 13 Nov 2013

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute

Martin Ruf

University of Tübingen

Uwe Scheuering

German Council of Economic Experts

Ulrich Schreiber

University of Mannheim - Department of Business Administration and Taxation; Centre for European Economic Research (ZEW)

Johannes Voget

University of Mannheim - Accounting and Taxation

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2013

Abstract

Repatriation taxes reduce the competitiveness of multinational firms from tax credit countries when bidding for targets in low tax countries. This comparative disadvantage with respect to bidders from exemption countries violates ownership neutrality, which results in production inefficiencies due to second-best ownership structures. This paper empirically estimates the magnitude of these effects. The abolishment of repatriation taxes in Japan and in the U.K. in 2009 has increased the number of acquisitions abroad by Japanese and British firms by 31.9% and 3.9 %, respectively. A similar policy switch in the U.S. is simulated to increase the number of U.S. cross-border acquisition by 17.1 %. We estimate the yearly gain in efficiency to be around 525 million dollar due to the Japanese reform and 13.5 million dollar due to the U.K. reform. Simulating such a reform for the U.S. results in a yearly efficiency gain of 1134 million dollar.

Keywords: international mergers and acquisitions, business taxation, repatriation taxes, ownership neutrality

JEL Classification: H250, G340

Suggested Citation

Feld, Lars P. and Ruf, Martin and Scheuering, Uwe and Schreiber, Ulrich and Voget, Johannes, Effects of Territorial and Worldwide Corporation Tax Systems on Outbound M&As (October 31, 2013). CESifo Working Paper Series No. 4455, Available at SSRN: https://ssrn.com/abstract=2353329

Lars P. Feld

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

Martin Ruf

University of Tübingen ( email )

Nauklerstraße 47
Tübingen, D-72076
Germany

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

Uwe Scheuering

German Council of Economic Experts ( email )

Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hessen 65180
Germany

Ulrich Schreiber

University of Mannheim - Department of Business Administration and Taxation ( email )

D-68131 Mannheim
Germany
+49 621 181 1718 (Phone)
+49 621 181 1716 (Fax)

Centre for European Economic Research (ZEW)

D-68161 Mannheim
Germany

Johannes Voget (Contact Author)

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

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