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Effects of the Fiscal Treatment of Tax Losses on the Efficiency of Markets and the Incidence of Mergers

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  • Michel Poitevin

Abstract

This paper surveys the major issues regarding the transferability of tax losses upon a change of control. Whether tax losses should be transferable or not depends on whether the market for corporate control is efficient or not. If there are too few efficiency-enhancing takeovers, then takeovers should be - subsidized - . If, on the contrary, there are too many takeovers (from an efficiency point of view), then takeovers should somehow be taxed. In either case, the transferability of tax losses may be an instrument for doing so. Three aspects are considered: (1) whether tax losses should be transferred upon a change of control or not, (2) whether the transfer should be restricted to the same line of business or not, and (3) whether losses should be used at the same speed at which they were (to be) used pre-merger or not. These issues are then discussed in the context of managerial control, product market competition, financing decisions, and investment decisions and risk-taking. Nous passons en revue dans cette étude les principales questions touchant la transférabilité des pertes fiscales en cas de changement de contrôle d'une entreprise. L'opportunité d'autoriser ou non le transfert des pertes fiscales dépend de l'efficacité du marché des prises de contrôle. Si les prises de contrôle accroissant l'efficacité sont trop peu nombreuses, il convient de les - subventionner - . Si, au contraire, les prises de contrôles sont trop nombreuses (sous l'angle de l'efficacité), il convient de les taxer sous une forme quelconque. Dans un cas comme dans l'autre, le régime de transférabilité des pertes fiscales peut servir à atteindre l'objectif visé. Trois aspects sont abordés ici : (1) l'opportunité d'autoriser le transfert des pertes fiscales en cas de changement de contrôle d'une entreprise; (2) l'opportunité d'autoriser ce transfert uniquement lorsque le type d'activité reste le même; (3) l'opportunité d'autoriser l'utilisation des pertes au même rythme qu'avant la fusion. Ces questions seront analysées dans le contexte du contrôle exercé par les directions d'entreprise, de la concurrence sur le marché des produits, des décisions de financement, ainsi que des décisions d'investissement et de la prise de risque.

Suggested Citation

  • Michel Poitevin, 1998. "Effects of the Fiscal Treatment of Tax Losses on the Efficiency of Markets and the Incidence of Mergers," CIRANO Working Papers 98s-33, CIRANO.
    • Handle: RePEc:cir:cirwor:98s-33
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    1. E. Appelbaum & E. Katz, 1987. "Asymmetric Taxation and the Theory of the Competitive Firm under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 357-369, May.
    2. Appelbaum, Elie & Katz, Eliakim, 1996. "Corporate taxation, incumbency advantage and entry," European Economic Review, Elsevier, vol. 40(9), pages 1817-1828, December.
    3. Chirkova, Elena (Чиркова, Елена) & Valieva, Dinara (Валиева, Динара) & Menshikov, Yuri (Меньшиков, Юрий) & Nosova, Alexandra (Носова, Александра), 2017. "Debt Restructuring of the Russian Metallurgical Companies Caused by the Crisis of 2008 [Реструктуризации Долга Российскими Металлургическими Компаниями В Кризис 2008 Года]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 3, pages 174-209, June.

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