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Impôt sur les profits et mode d’entrée dans le marchéétranger .
Author(s) -
Davies Ronald B.,
Egger Hartmut,
Egger Peter
Publication year - 2010
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.1540-5982.2010.01590.x
Subject(s) - economics , foreign direct investment , profit (economics) , welfare , international economics , tax competition , harmonization , competition (biology) , double taxation , monetary economics , microeconomics , international trade , market economy , ad valorem tax , macroeconomics , public economics , physics , ecology , biology , acoustics
This paper studies the role of profit taxation for an international firm's decision upon how to penetrate a foreign market – through exports or through foreign direct investment (FDI) and local supply. We show that with harmonized taxes the international firm may choose FDI even though this has welfare costs from a global point of view. With tax competition, the host country can enforce exporting instead of FDI. This leads to a Nash equilibrium associated with higher world welfare than harmonized taxes. Thus, because of the effect on entry mode, tax competition provides heretofore unexplored benefits as compared to tax harmonization.