FERRETT, B. and WOOTON, I., 2010. Tax competition and the international distribution of firm ownership: an invariance result. International Tax and Public Finance, 17 (5), pp.518-531.
How does the international distribution of firm ownership affect the outcomes of tax/subsidy competition for mobile plants? As corporate ownership becomes increasingly globalised, this question becomes increasingly important for policy. We prove a strong invariance result in the context of the tax/subsidy competition between two host countries for a monopoly firm’s plant. Both the equilibrium plant location and the equilibrium tax/subsidy offers are independent of the international distribution of the firm’s ownership. The reason is that the tax/subsidy competition equalises the firm’s post-tax profits across countries, making owners of capital indifferent towards the location of production.
The final publication is available at Springer via: http://dx.doi.org/10.1007/s10797-009-9126-z.