Does Acquisition by Non-U.S. Shareholders Cause U.S. Firms to Pay Less Tax?

The U.S. corporate tax revenue implications for foreign-domiciled firms acquiring U.S. companies is an important and longstanding tax policy issue. This study attempts to provide some empirical underpinning for this controversial debate. We compare actual corporate taxable income before and after their 1996 acquisitions for 31 matched pairs of firms, half acquired by foreign-controlled companies and half acquired by American-controlled firms. Contrary to claims that foreign-controlled firms pay less tax, we find no evidence that taxable income declines more after a non-U.S. shareholder acquires a U.S.-domiciled firm than after a U.S. shareholder acquires a U.S.-domiciled firm.