Formula Apportionment: Is It Better Than The Current System And Are There Better Alternatives?
AbstractThis analysis of formula apportionment compared to the current U.S. system recognizes that income shifting has two main sources, excess returns attributable to intangibles and debt, and that a major goal of income division systems is preserving neutrality between arm’s length and related party transactions. A model demonstrates that separate accounts (SA) and formula apportionment (FA) distort behavior along different margins. Simulations indicate that FA has no clear advantage over SA. Static estimates of U.S. tax revenues under FA suggest potentially large increases, but simulations show that revenue under FA and SA is similar once behavioral responses are taken into account.
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Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 63 (2010)
Issue (Month): 4 (December Citation: 63 National Tax Journal 1145-1184 (December 2010))
Other versions of this item:
- Rosanne Altshuler & Harry Grubert, 2009. "Formula Apportionment: Is it better than the current system and are there better alternatives?," Working Papers 0901, Oxford University Centre for Business Taxation.
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- Fuest, Clemens & Spengel, Christoph & Finke, Katharina & Heckemeyer, Jost & Nusser, Hannah, 2013.
"Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform,"
ZEW Discussion Papers
13-044, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Fuest, Clemens & Spengel, Christoph & Finke, Katharina & Heckemeyer, Jost H. & Nusser, Hannah, 2013. "Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform," ZEW Discussion Papers 13-078, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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- David E.Wildasin, 2010. "State Corporation Income Taxation: An Economic Perspective on Nexus," Working Papers 1011, Oxford University Centre for Business Taxation.
- Harry Grubert & Rosanne Altshuler, 2013. "Fixing the System: An Analysis of Alternative Proposals for the Reform of International Tax," Departmental Working Papers 201305, Rutgers University, Department of Economics.
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