Český finanční a účetní časopis 2020(2):27-42 | DOI: 10.18267/j.cfuc.545

Valid commercial reasons for mergers

Jáchym Lukeš

Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, katedra finančního účetnictví a auditingu, nám. W. Churchilla 4, 130 67 Praha 3

National and European tax legislation deals with the notion of proper economic reasons for mergers. The aim of this article is to link the economic and tax perspective on the implementation of mergers of companies and in this framework to characterize the basic rules for assessing mergers of companies in terms of tax law in practice. The economic and tax perspective is connected on a model example, on which the main methodological procedures for the assessment of mergers are presented. The connection between the two areas has led to clear conclusions for tax practice. It follows from the application of the so-called principle of abuse of law that it is necessary to assess the proper economic reasons for a merger only if it is clear that there is a tax motive for the implementation of a specific merger. This view could not have been previously applied due to a specific, inappropriate regulation in national legislation.From the conclusions of the basic economic models of oligopolies, it can be concluded that for mergers of related companies can not lead to economically relevant cost savings. The argument of cost savings as a proper economic reason for the merger of related companies is thus not possible in tax practice.The article further outlines that for mergers of related companies there may be a so-called institutional or conditional reason for the merger, which could be considered as the only proper economic reason for the merger of related companies. Verification of the application of a similar principle can be recommended for further research.

Keywords: Oligopoly; Merger; Abuse of tax law

JEL classification: D43, K34

Received: July 18, 2020; Revised: October 6, 2020; Accepted: October 19, 2020; Prepublished online: November 12, 2020; Published: November 13, 2020  Show citation