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

Michel Poitevin


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.

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Index terms

Keywords :

pertes fiscales, fusions


tax losses, mergers
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Electronic reference

Michel Poitevin, “Effects of the Fiscal Treatment of Tax Losses on the Efficiency of Markets and the Incidence of Mergers”Économie publique/Public economics [Online], 11 | 2002/2, Online since 02 January 2006, connection on 14 June 2024. URL:; DOI:

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About the author

Michel Poitevin

Département de sciences économiques, Université de Montréal, CIREQ and CIRANO

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The text and other elements (illustrations, imported files) are “All rights reserved”, unless otherwise stated.

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