Competition for FDI and profit shifting: On the effects of subsidies and tax breaks

Oscar Amerighi, Giuseppe De Feo

Research output: Contribution to journalArticle

1 Citation (Scopus)


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 for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition can also increase overall surplus by changing the firm’s investment decision when profit-shifting motivations induce the firm to locate in the (beforetax) least profitable country.
Original languageEnglish
Pages (from-to)374 - 404
Number of pages31
Issue number3
Publication statusPublished - 1 Sep 2014
Externally publishedYes


All Science Journal Classification (ASJC) codes

  • Finance

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