In a noncompetitive environment, a tax increase leads to a higher fraction of sales smuggled under pure ad valorem taxation, but the effect is ambiguous under a purely specific tax. Under a mixed tax regime, a tax rise increases the fraction of sales smuggled when the balance of the two types of...

This paper reexamines the effects of bilateral tax treaties on investment location decisions, using a large panel of European countries. It provides evidence that tax treaties induced a positive and significant impact on the number of foreign subsidiaries incorporated in the last decade....

This aims to provide a perspective on the ideal tax system, using insights from optimal-tax theory supplemented with empirical evidence. These insights are applied to actual policy questions regarding the progressiveness of the labor-income tax, in-work tax credits, the design of the...

We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits to lower-tax jurisdictions. In such a framework we show that targeted tax competition may lead to higher welfare...

This essay critically revisits the roles and influences of tax havens in the world economy. It combines various messages of available studies in one scheme, and uses various data sources to document regularities regarding multinational firms, financial assets, and other relevant information for...

This article compares an ACE system with a CBIT system in an open economy. Using a real-option approach, we show that, if a firm can decide when to invest, a trade-off is found. According to traditional wisdom, a high-income firm investing in an ACE system faces a heavier tax burden at each...

We analyze the influence of tax progression on optimal investment policy and its value. We show that three possible optimal regimes arise, depending on thenature of the tax policy. If the exogenously given progression threshold lies between the optimal capital stocks in the case of higher and...

This paper analyzes the tax responsiveness of bilateral foreign direct investment flows in the EU. Differentiating between investments in the three main economic sectors and using effective tax rates to measure tax incentives, we show that the tax sensitivity of foreign direct investment depends...

This paper analyzes effects of an equalization tax on the decisions of a multinational company. An equalization tax is an extra corporation tax on dividend distributions to ensure that the underlying profit of a dividend has borne a tax in the corporate sector equal to the imputation credit...

The well-known Johansson-Samuelson theorem proves that, in partial equilibrium, comprehensive income taxation with a uniform tax rate does not affect asset values if tax depreciation allowances coincide with economic depreciation. In this article, we show that this result fails to hold in...