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Corporate Income Taxation of Multinationals and Fiscal Equalization

  • Caterina Liesegang

    ()

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Marco Runkel

    ()

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

This paper investigates the e ect of scal 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 reects the scal 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 suffciently large.

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File URL: http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2009_Dateien/2009_28.pdf
File Function: First version, 2009
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Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 09028.

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Length: 27 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:mag:wpaper:09028
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