Tax Avoidance through Cross-Border Mergers and Acquisitions

76 Pages Posted: 9 Jul 2020 Last revised: 17 Feb 2021

See all articles by Jean-Marie Meier

Jean-Marie Meier

University of Texas at Dallas

Jake Smith

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Date Written: June 30, 2020

Abstract

We document a novel tax avoidance strategy: cross-border, tax-haven mergers and acquisitions (M&A). Tax havens have $2.4 trillion in M&A deal value beyond what is predicted based on economic fundamentals. Cross-border, tax-haven M&A results in $30.6 billion in tax avoidance annually, and cross-border, non-haven M&A results in an additional $35.8 billion in annual tax avoidance. This is the first paper to document that tax havens affect real investment on a large scale, and not just capital flows on paper. Moreover, we create an algorithm to derive the tax residence of any company given data on the firm's country of incorporation and headquarters.

Keywords: tax avoidance, tax havens, mergers and acquisitions, gravity model, capital flows, foreign direct investment, taxation, multinational corporations

JEL Classification: F21, G34, H25, H26, H73, K34

Suggested Citation

Meier, Jean-Marie and Smith, Jake, Tax Avoidance through Cross-Border Mergers and Acquisitions (June 30, 2020). Available at SSRN: https://ssrn.com/abstract=3639640 or http://dx.doi.org/10.2139/ssrn.3639640

Jean-Marie Meier (Contact Author)

University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Road
Richardson, TX 75080
United States

HOME PAGE: http://www.jean-mariemeier.com/

Jake Smith

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

800 W Campbell Rd
Richardson, TX 75080
United States

HOME PAGE: http://jakesmith.com

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