Tax Avoidance through Cross-Border Mergers and Acquisitions

Abstract

We provide the first comprehensive analysis of tax avoidance through cross-border, tax-haven mergers and acquisitions (M&A). Using novel tax residence data, we investigate 13,307 such transactions from 1990 to 2017, totaling $4.1 trillion in deal value, or 29% of cross-border M&A volume. $2.4 of the $4.1 trillion exceeds our prediction based on a gravity model with economic fundamentals. Small havens such as Bermuda alone make up $1.0 trillion or 8% of cross-border M&A volume. Tax haven M&A enables profit-shifting on intellectual property and the relocation of headquarters to havens, and results in $30.6 billion in recurring annual tax savings.

Keywords: Cross-border mergers and acquisitions, tax avoidance, tax havens

JEL Classification: G34, H26, H73