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Tax Enforcement and Tax Havens under Formula Apportionment

Listed author(s):
  • Becker, Johannes
  • Fuest, Clemens

In this paper, we consider optimal tax enforcement policy in the presence of profit shifting towards tax havens. We show that, under separate accounting, tax enforcement levels may be too high due to negative fiscal externalities. In contrast, under formula apportionment, tax enforcement is likely to be too low due to positive externalities of tax enforcement. Our results challenge recent contributions arguing that, under formula apportionment, there is a tendency towards inefficiently high levels of (effective) tax rates.

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File URL: https://www.econstor.eu/bitstream/10419/23269/1/FiFo-CPE-DP_07-08.pdf
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Paper provided by University of Cologne, FiFo Institute for Public Economics in its series FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge with number 07-8.

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Date of creation: 2007
Handle: RePEc:zbw:uoccpe:6152
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