Corporate Tax Systems and Cross Country Profit Shifting
AbstractThe paper analyses optimal taxation of corporate profits when governments can choose both the rate and the base of the corporation tax, but are constrained to collect a given amount of corporate tax revenue. In a standard two-period model of investment and international mobility of portfolio capital only, the optimal tax system allows a full deduction for the costs of capital. When foreign direct investment is permitted, however, and firms can shift profits between countries through transfer pricing, it will be optimal for each government to distort investment decisions in order to reduce tax rates and limit the incentive for profit shifting. Copyright 2000 by Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 52 (2000)
Issue (Month): 2 (April)
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Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
Other versions of this item:
- Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate tax systems and cross country profit shifting," Munich Reprints in Economics 20419, University of Munich, Department of Economics.
- Haufler, A. & Schjelderup, G., 1999. "Corporate Tax Systems and Cross Country Profit Shifting," Papers 1/99, Norwegian School of Economics and Business Administration-.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
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