Taxation of foreign multinationals: A sequential bargaining approach to tax holidays |
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| Authors: | Chris Doyle Sweder Van Wijnbergen |
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| Institution: | (1) Department of Applied Economics, University of Cambridge, Sidgwick Avenue, CB3 9DE Cambridge, UK;(2) Department of Economics, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, Holland |
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| Abstract: | Tax holidays for foreign multinational firms are tax concessions or straight subsidies granted for a limited period after entry. Such phenomena occur widely. We apply a sequential bargaining framework to a problem of ex post bilateral monopoly characterized by the presence of a host-country government and a foreign multinational firm. We show formally how a tax holiday can arise due to irreversible outlays and outside options. |
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| Keywords: | tax holidays bargaining sunk costs multinationals |
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