The Revenue Consequences of Using Formula Apportionment to Calculate U.S. and Foreign-Source Income: A Firm-Level Analysis
This paper examines the 1989–1993 publicly available financial reports of 46 U.S.-based multinationals to estimate the revenue implications of implementing a U.S. federal formula apportionment system. Ignoring behavioral responses, we estimate shifting to an equal-weighted, three-factor formula would have increased their U.S. tax liabilities by 38 percent, with an 81 percent increase for oil and gas firms. We find the firms report a lower percentage of their worldwide profits as American profits than their American share of assets, sales, or payroll. The results may be attributed to more profitable foreign operations, tax-motivated income shifting, or measurement error. Copyright Kluwer Academic Publishers 1998
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Volume (Year): 5 (1998)
Issue (Month): 1 (February)
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- James R. Hines, Jr. & Eric M. Rice, 1990. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers 3477, National Bureau of Economic Research, Inc.
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- Roger H. Gordon & John D. Wilson, 1984. "An Examination of Multijurisdictional Corporate Income Taxes Under Formula Apportionment," NBER Working Papers 1369, National Bureau of Economic Research, Inc.
- Daniel Frisch, 1983. "Issues in the Taxation of Foreign Source Income," NBER Chapters,in: Behavioral Simulation Methods in Tax Policy Analysis, pages 289-332 National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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