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International Taxation and the Direction and Volume of Cross-Border M&As




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    • Huizinga is from CentER, Tilburg University, and Voget is from CentER, Tilburg University and the Centre for Business Taxation, Saïd Business School, Oxford University. We are grateful for valuable comments from Campbell Harvey, Jenny Ligthart, Simon Loretz, Bertrand Melenberg, Arthur van Soest, a referee, and seminar participants at Tilburg University. Voget acknowledges financial support from the Netherlands Organization for Scientific Research (NWO).


We show that the parent-subsidiary structure of multinational firms created by cross-border mergers and acquisitions is affected by the prospect of international double taxation. Specifically, the likelihood of parent firm location in a country following a cross-border takeover is reduced by high international double taxation of foreign-source income. At the same time, countries with high international double taxation attract smaller numbers of parent firms. A unilateral elimination of worldwide taxation by the United States is simulated to increase the proportion of parent firms locating in the United States following cross-border mergers and acquisitions from 53% to 58%.