Optimal Tax Policy When Firms are Internationally Mobile

25 Pages Posted: 5 Dec 2005

See all articles by Johannes Becker

Johannes Becker

University of Cologne

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Date Written: November 2005

Abstract

The standard tax theory result that investment should not be distorted is based on the assumption that profits are locally bound. In this paper we analyze the optimal tax policy when firms are internationally mobile. We show that the optimal policy response to increasing firm mobility may be taxation, subsidization or non-distortion of investment depending on whether the mobile firms are more or less profitable than the average firm in the economy. Our findings may contribute to understanding recent tax policy developments in many OECD countries.

Keywords: corporate taxes, optimal tax policy

JEL Classification: H25, H21

Suggested Citation

Becker, Johannes and Fuest, Clemens, Optimal Tax Policy When Firms are Internationally Mobile (November 2005). CESifo Working Paper Series No. 1592. Available at SSRN: https://ssrn.com/abstract=863484

Johannes Becker

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Clemens Fuest (Contact Author)

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

Poschinger Str. 5
Munich, DE 81679
Germany
++89-9224-1430 (Phone)

Ludwig-Maximilians-University, Munich ( email )

Schackstrasse 4 / II
Munich, DE 80539
Germany

Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, DE 80539
Germany
++89 2180-2748 (Phone)
++89 2180-17845 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
194
Abstract Views
1,744
rank
156,394
PlumX Metrics