Both, the UK and Japan abolished the tax credit system for foreign source dividends in 2009 in favour of the exemption system. With the move towards a dividend exemption…
Both, the UK and Japan abolished the tax credit system for foreign source dividends in 2009 in favour of the exemption system. With the move towards a dividend exemption system the governments intended to enhance the international tax competitiveness of their countries. The purpose of this paper is to evaluate the implications of substituting the credit system for the exemption system in the UK and Japan on cross-border transaction prices when competing for international acquisitions.
The paper uses an economic model under certainty to analyse the changes in cross-border marginal purchase and seller prices as a result of the introduction of the newly introduced dividend exemption system.
Shifting to an exemption system has ambiguous effects on the ability to compete for foreign acquisitions: investors from both countries are able to pay higher prices in the course of acquisitions, but while investors from the UK become more competitive, the relative competitive position for Japanese investors hardly changes and remains relatively constrained, independent of the form of double taxation relief. Thus the author verifies that the international tax regime is not the only determinant influencing the competitive position, ranking second to, e.g., the interaction with international tax rate differentials.
The international tax reforms in UK and Japan in 2009 offer a unique opportunity to study the impact of international tax policy on the international tax competitiveness of multinational firms in the course of foreign acquisitions. Evidence from this paper is not exclusively applicable to the UK and Japan setting. The observed effects shed new light on the intensified debate in the USA of changing the international tax system by analysing the impact on the bidding situation in international acquisitions in a real-world transition scenario.
The lens used by the courts and much of the antitrust literature on predatory selling and/or buying is based on partial equilibrium methodology. We demonstrate that such…
The lens used by the courts and much of the antitrust literature on predatory selling and/or buying is based on partial equilibrium methodology. We demonstrate that such methodology is unreliable for assessments of predatory monopoly or monopsony conduct. In contrast to the typical two-stage dynamic analysis involving a predation period followed by a recoupment period, we advance a general equilibrium analysis that demonstrates the critical role of related industries and markets. Substitutability versus complementarity of both inputs and outputs is critical. With either monopolistic or monopsonistic market power (but not both), neither predatory overselling nor predatory overbuying is profitably sustainable. Two-stage predation/recoupment is profitable only with irreversibility in production and cost functions, unlike typical estimated forms from the production economic literature. However, when the market structure admits both monopolistic and monopsonistic behavior, predatory overbuying can be profitably sustainable while overselling cannot. Useful distinctions are drawn between contract versus non-contract markets for input markets.
It is demonstrated how an analysis of airports’ cost structures and the calculation of long-run marginal costs (MCs) of serving passengers and airplanes can be used as a basis for setting airport charges according to the principles of welfare economics. Based on Norwegian data, the MC for an extra passenger (PAX) and extra air traffic movement (ATM) are used to set airport charges under the assumption that the charges should be equal for all airports in the country. When adjusting the estimates to meet revenue restrictions and comparing the estimates to current charges, we observe that PAX should be charged more and ATM less. This finding is in line with recommendations from the International Air Transport Association (IATA). When allowing charges to vary between airports, we demonstrate how a Ramsey pricing approach can be applied to set differentiated PAX and ATM charges, considering both the supply side (the competitive conditions between the airlines operating at the airports) and the demand side (the passengers’ price elasticity of demand).
INTRODUCTION During the past dozen years a relatively large theoretical literature has grown out of the models proposed by Averch‐Johnson (2) and, to a lesser extent…
INTRODUCTION During the past dozen years a relatively large theoretical literature has grown out of the models proposed by Averch‐Johnson (2) and, to a lesser extent, Wellisz (90). Averch‐Johnson (here‐after A‐J) pointed out the now famous overcapitalization effect‐that a monopoly subject to rate of return regulation has an incentive to use more than the cost minimizing value of capital. The A‐J model was at first regarded as simply a theoretical explanation of what was long thought to be a significant cost of regulation. After languishing in this state for several years, the model achieved some popularity as a vehicle for theoretical explorations of various aspects of rate regulation. To date, the A‐J model has given rise to nearly forty papers on what has come to be called “the theory of regulatory constraint.”