Discussion Paper Details

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Title: International Taxation and the Direction and Volume of Cross-Border M&As

Author(s): Harry Huizinga and Johannes Voget

Publication Date: December 2006

Keyword(s): international taxation and mergers and acquisitions

Programme Area(s): Financial Economics and Public Economics

Abstract: In an international merger or acquisition, the national residences of the acquirer and the target determine to what extent the newly created multinational firm is subject to international double taxation. This paper presents evidence that the parent-subsidiary structure of newly created multinational firms reflects the prospect of international double taxation. The number of acquiring firms at the national level similarly reflects international double taxation. The evidence suggests that tax policy in the form of lower tax rates or the elimination of residence-based worldwide taxation attracts additional parent companies of multinational firms. On the basis of our estimation, we simulate the impact of the elimination of worldwide taxation by the United States on parent firm selection.

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Bibliographic Reference

Huizinga, H and Voget, J. 2006. 'International Taxation and the Direction and Volume of Cross-Border M&As'. London, Centre for Economic Policy Research.