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Taxation of foreign multinationals: A sequential bargaining approach to tax holidays

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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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Authors and Affiliations

  1. Department of Applied Economics, University of Cambridge, Sidgwick Avenue, CB3 9DE, Cambridge, UK

    Chris Doyle

  2. Department of Economics, University of Amsterdam, Roetersstraat 11, 1018 WB, Amsterdam, Holland

    Sweder Van Wijnbergen

Authors
  1. Chris Doyle
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  2. Sweder Van Wijnbergen
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Doyle, C., Van Wijnbergen, S. Taxation of foreign multinationals: A sequential bargaining approach to tax holidays. Int Tax Public Finan 1, 211–225 (1994). https://doi.org/10.1007/BF00873838

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  • DOI: https://doi.org/10.1007/BF00873838

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