Advanced Search
MyIDEAS: Login to save this paper or follow this series

Corporate Income Taxation of Multinationals and Unemployment

Contents:

Author Info

  • Thomas Eichner
  • Marco Runkel

Abstract

Within a two-country model with involuntary unemployment, this paper investigates corporate income taxation under separate accounting versus formula apportionment. In contrast to separate accounting, under formula apportionment the corporate tax policy causes a fiscal externality which goes back to unemployment. This unemployment externality is the lowest when the apportionment formula does not contain a payroll factor. It tends to compensate other externalities such that tax rates become inefficiently low. In an empirical calibration, we show that the transition from separate accounting to formula apportionment improves welfare and reduces unemployment. The welfare increase is the strongest under a pure sales formula.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-12/cesifo1_wp1868.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1868.

as in new window
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1868

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: separate accounting; formula apportionment; unemployment;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  2. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, 2001. "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," CESifo Working Paper Series 491, CESifo Group Munich.
  3. Hans Jarle Kind & Helene Midelfart & Guttorm Schjelderup, 2004. "Corporate Tax Systems, Multinational Enterprises, and Economic Integration," CESifo Working Paper Series 1241, CESifo Group Munich.
  4. Marcel Gérard, 2006. "Reforming the Taxation of Multijurisdictional Enterprises in Europe, a Tentative Appraisal," CESifo Working Paper Series 1795, CESifo Group Munich.
  5. Austan Goolsbee & Edward L Maydew, 1998. "Coveting Thy Neighbor's Manuafacturing: The Dilemma of State Income Apportionment," NBER Working Papers 6614, National Bureau of Economic Research, Inc.
  6. Ogawa, Hikaru & Sato, Yasuhiro & Tamai, Toshiki, 2006. "A note on unemployment and capital tax competition," Journal of Urban Economics, Elsevier, vol. 60(2), pages 350-356, September.
  7. Gabszewicz, J. J. & van Ypersele, T., 1996. "Social protection and political competition," Journal of Public Economics, Elsevier, Elsevier, vol. 61(2), pages 193-208, August.
  8. Pinto, Santiago M., 2007. "Corporate profit tax, capital mobility, and formula apportionment," Journal of Urban Economics, Elsevier, vol. 62(1), pages 76-102, July.
  9. Nielsen, Søren Bo & Raimondos-Møller, Pascalis & Schjelderup, Guttorm, 2010. "Company taxation and tax spillovers: Separate accounting versus formula apportionment," European Economic Review, Elsevier, Elsevier, vol. 54(1), pages 121-132, January.
  10. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  11. Huizinga, Harry & Nicodeme, Gaetan, 2006. "Foreign ownership and corporate income taxation: An empirical evaluation," European Economic Review, Elsevier, Elsevier, vol. 50(5), pages 1223-1244, July.
  12. Robert Chirinko, 2002. "Corporate Taxation, Capital Formation, and the Substitution Elasticity between Labor and Capital," Emory Economics, Department of Economics, Emory University (Atlanta) 0201, Department of Economics, Emory University (Atlanta).
  13. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, Springer, vol. 5(1), pages 87-120, March.
  14. Clemens Fuest & Bernd Huber, 1999. "Tax Coordination and Unemployment," International Tax and Public Finance, Springer, Springer, vol. 6(1), pages 7-26, February.
  15. Marcel Gérard, 2005. "Multijurisdictional Firms and Governments’ Strategies under Alternative Tax Designs," CESifo Working Paper Series 1527, CESifo Group Munich.
  16. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2004. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 59(6), pages 2451-2487, December.
  17. Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, Elsevier, vol. 87(9-10), pages 2207-2223, September.
  18. Nonneman, Walter & Vanhoudt, Patrick, 1996. "A Further Augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(3), pages 943-53, August.
  19. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate Tax Systems and Cross Country Profit Shifting," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 306-25, April.
  20. Gordon, Roger H & Wilson, John Douglas, 1986. "An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment," Econometrica, Econometric Society, Econometric Society, vol. 54(6), pages 1357-73, November.
  21. Huizinga, H. & Nielsen, S.B., 1995. "Capital Income and Profits Taxation with Foreign Ownership of Firms," Papers, Tilburg - Center for Economic Research 9582, Tilburg - Center for Economic Research.
  22. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
  23. Fuest, Clemens & Huber, Bernd, 1999. "Tax Coordination and Unemployment," Munich Reprints in Economics, University of Munich, Department of Economics 20298, University of Munich, Department of Economics.
  24. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
  25. Rüdiger Pethig & Andreas Wagener, 2003. "Profit Tax Competition and Formula Apportionment," Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht 106-03, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  26. Haufler, Andreas, 2006. "Die Besteuerung multinationaler Unternehmen," Discussion Papers in Economics, University of Munich, Department of Economics 1153, University of Munich, Department of Economics.
  27. Peter Sørensen, 2004. "Company Tax Reform in the European Union," International Tax and Public Finance, Springer, Springer, vol. 11(1), pages 91-115, January.
  28. Wolfgang Eggert & Guttorm Schjelderup, 2003. "Symmetric Tax Competition under Formula Apportionment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 439-446, 04.
  29. Arjan Lejour & Harrie Verbon, 1996. "Capital mobility, wage bargaining, and social insurance policies in an economic union," International Tax and Public Finance, Springer, Springer, vol. 3(4), pages 495-513, October.
  30. Kant, Chander, 1988. "Endogenous transfer pricing and the effects of uncertain regulation," Journal of International Economics, Elsevier, Elsevier, vol. 24(1-2), pages 147-157, February.
  31. Riedel, Nadine & Runkel, Marco, 2007. "Company tax reform with a water's edge," Journal of Public Economics, Elsevier, Elsevier, vol. 91(7-8), pages 1533-1554, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Caterina Liesegang & Marco Runkel, 2009. "Corporate Income Taxation of Multinationals and Fiscal Equalization," FEMM Working Papers 09028, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  2. Becker, Johannes & Runkel, Marco, 2013. "Corporate tax regime and international allocation of ownership," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(1), pages 8-15.
  3. Nadine Riedel, 2011. "Taxing multi-nationals under union wage bargaining," International Tax and Public Finance, Springer, Springer, vol. 18(4), pages 399-421, August.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1868. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.