Doyle, C. and \van Wijnbergen\, S. (1994). Taxation of foreign multinationals: a sequential bargaining approach to tax holidays International Tax and Public Finance, 1(3):211--225.
-
Affiliated authorSweder van Wijnbergen
-
Publication year1995
-
JournalInternational Tax and Public Finance
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.