The Paradoxical Impact of Corporate Inversions on US Tax Revenue

69 Pages Posted: 21 Apr 2015 Last revised: 23 Aug 2016

Date Written: August 21, 2016

Abstract

Corporate inversions – reorganizations that result in relocating corporate tax domiciles from the US to a foreign country – are alleged to cost the US Treasury billions of dollars in tax revenue. Contrary to these assertions, we find that that inverting firms pay no less taxes after the inversion than they did before. Moreover, contrary to the common belief, we estimate that the inversions result in US shareholders realizing $81,415.92 million in capital gains and annual increases in dividends of $9,959.37 million. Thus, paradoxically, inversions are likely to increase tax collections by the US Treasury.

Keywords: Cash, Tax, Mergers and Acquisitions

JEL Classification: M40, G34, H25, F23

Suggested Citation

Gunn, Rita and Lys, Thomas Z., The Paradoxical Impact of Corporate Inversions on US Tax Revenue (August 21, 2016). Available at SSRN: https://ssrn.com/abstract=2596706 or http://dx.doi.org/10.2139/ssrn.2596706

Rita Gunn (Contact Author)

Owen Graduate School of Management - Vanderbilt University ( email )

Nashville, TN 37203
United States

Thomas Z. Lys

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Department of Accounting & Information Systems
Evanston, IL 60208
United States
847-491-2673 (Phone)
847-467-1202 (Fax)

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