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Corporate Income Taxation of Multinationals and Fiscal Equalization

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Author Info
Caterina Liesegang ()
Marco Runkel ()

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Abstract

This paper investigates the effect of fiscal equalization on the efficiency properties of corporate income tax rates chosen by symmetric countries in a Nash tax competition game under the taxation principles of Separate Accounting and Formula Apportionment. Fiscal equalization ensures efficiency if the marginal transfer just reflects the fiscal and pecuniary externalities of tax rates. In contrast to previous studies, tax base equalization (Representative Tax System) does not satisfy this condition, but combining tax revenue and private income equalization does, regardless of which taxation principle is implemented. Under Formula Apportionment, tax base equalization is superior to tax revenue equalization if the wage income externality is sufficiently large.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2747.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2747

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Related research
Keywords: separate accounting; formula apportionment; fiscal equalization;

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Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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  10. repec:cpr:ceprdp:7379 is not listed on IDEAS
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  16. Subhasish M. Chowdhury & Dan Kovenock J. & Roman M. Sheremeta, 2009. "An Experimental Investigation of Colonel Blotto Games," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  25. Lars P. Feld & Christoph A. Schaltegger, 2009. "Political Stability and Fiscal Policy - Time Series Evidence for the Swiss Federal Level since 1849," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  26. Marc Gronwald, 2009. "Investigating the U.S. Oil-Macroeconomy Nexus using Rolling Impulse Responses," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  27. Ali Bayar & Bram Smeets, 2009. "Government Deficits in the European Union: An Analysis of Entry and Exit Dynamics," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  28. Hans Fehr, 2009. "Pension Funding and Individual Accounts in Economies with Life-cyclers and Myopes," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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