Merger Policy and Tax Competition

Haufler, Andreas and Schulte, Christian (21. November 2007): Merger Policy and Tax Competition. Discussion Papers in Economics 2007-39

Abstract

In many situations governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy production-based taxes. We find that whether national or international mergers are more likely to be enacted in the presence of nationally optimal tax policies depends crucially on the ownership structure of firms. When all firms are owned domestically in the pre-merger situation, non-cooperative tax policies are more efficient in the national merger case and smaller synergy effects are needed for this type of merger to be proposed and cleared. These results are reversed when there is a high degree of foreign firm ownership prior to the merger.

• Item Type: Paper ()
• Keywords: merger regulation; tax competition
• Subjects: Economics; Economics > Discussion Papers in Economics; Economics > Discussion Papers in Economics > Industrial Organization; Economics > Discussion Papers in Economics > Public Finance
• Dewey Classification: 300 Social sciences; 300 Social sciences > 330 Wirtschaft
• Journal of Economic Literature classification: H21, H77, L13, L50