The Nexus of Corporate Income Taxation and Multinational Activity
Abstract
If a firm operates abroad, the host and the residence country have to decide how to divide the taxing rights among them. Firstly, the host country has to determine whether or not the firm has to file for income taxation at source. Secondly, the income has to be split between the two jurisdictions for tax purposes. These two decisions determine the extent of source- and residence-based taxation. We build a two-country model with costs of tax administration and compliance in order to analyze these two decision margins. We show that the globally optimal solution may imply a mix of source-based and residence-based taxation. Decentralized policies may attain the global optimum if specific transfer pricing rules are applied.Download Info
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Bibliographic Info
Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 68 (2012)
Issue (Month): 3 (September)
Pages: 231-251
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Web page: http://www.mohr.de/fa
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Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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Related research
Keywords: corporate taxation; nexus threshold; multinational firms;Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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