Tax Competition with Formula Apportionment: The Interaction between Tax Base and Sharing Mechanism
AbstractThe EU Commission is advocating a common consolidated tax base for the corporate income tax, accompanied by a revenue sharing mechanism based on formula apportionment. We analyse tax competition in such a regime, focussing on the interaction between the definition of the tax base and the apportionment method. Tax competition leads to suboptimally low tax rates if and only if the investment elasticity of the tax base is lower than the investment elasticity of the apportionment factor. For any apportionment method a change in the definition of the tax base can turn a race-to-the-bottom in tax competition into a race-over-the-top.
Download InfoIf 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.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2097.
Date of creation: 2007
Date of revision:
tax competition; formular apportionment; corporate income tax;
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.:
- Rüdiger Pethig & Andreas Wagener, 2003.
"Profit Tax Competition and Formula Apportionment,"
CESifo Working Paper Series
1011, CESifo Group Munich.
- Anand, Bharat N. & Sansing, Richard, 2000. "The Weighting Game: Formula Apportionment as an Instrument of Public Policy," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 183-200, June Cita.
- Michael Devereux, 2004. "Debating Proposed Reforms of the Taxation of Corporate Income in the European Union," International Tax and Public Finance, Springer, vol. 11(1), pages 71-89, January.
- Nielsen, Søren Bo & Raimondos-Møller, Pascalis & Schjelderup, Guttorm, 2010. "Company taxation and tax spillovers: Separate accounting versus formula apportionment," European Economic Review, Elsevier, vol. 54(1), pages 121-132, January.
- European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies 0005, Directorate General Taxation and Customs Union, European Commission.
- Matthias Wrede, 2010.
"Multinational Capital Structure and Tax Competition,"
CESifo Working Paper Series
3041, CESifo Group Munich.
- Matthias Wrede, 2009. "Multinational Capital Structure and Tax Competition," MAGKS Papers on Economics 200934, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Pedro Gomes & Francois Pouget, 2008. "Corporate Tax Competition and the Decline of Public Investment," CESifo Working Paper Series 2384, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.