Details
| Original language | English |
|---|---|
| Pages (from-to) | 631-655 |
| Number of pages | 25 |
| Journal | International Tax and Public Finance |
| Volume | 14 |
| Issue number | 6 |
| Early online date | 21 Feb 2007 |
| Publication status | Published - Dec 2007 |
Abstract
We analyze corporate income tax competition with international capital mobility when the common tax base is allocated to governments according to an apportionment formula. Labor can be either internationally mobile or immobile. We compare the Nash equilibria for different apportionment methods. Tax competition produces lower tax rates the more elastically the formula share responds to tax rate changes. More specifically, equilibrium tax rates are typically lowest when apportionment is based on property-shares, followed by payroll- and sales-shares apportionment. Compared to their cooperative levels, equilibrium tax rates are too low for property-share apportionment but tend to be too high for the other formulas.
Keywords
- Formula apportionment, Tax competition
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: International Tax and Public Finance, Vol. 14, No. 6, 12.2007, p. 631-655.
Research output: Contribution to journal › Article › Research › peer review
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TY - JOUR
T1 - Profit tax competition and formula apportionment
AU - Pethig, Rüdiger
AU - Wagener, Andreas
PY - 2007/12
Y1 - 2007/12
N2 - We analyze corporate income tax competition with international capital mobility when the common tax base is allocated to governments according to an apportionment formula. Labor can be either internationally mobile or immobile. We compare the Nash equilibria for different apportionment methods. Tax competition produces lower tax rates the more elastically the formula share responds to tax rate changes. More specifically, equilibrium tax rates are typically lowest when apportionment is based on property-shares, followed by payroll- and sales-shares apportionment. Compared to their cooperative levels, equilibrium tax rates are too low for property-share apportionment but tend to be too high for the other formulas.
AB - We analyze corporate income tax competition with international capital mobility when the common tax base is allocated to governments according to an apportionment formula. Labor can be either internationally mobile or immobile. We compare the Nash equilibria for different apportionment methods. Tax competition produces lower tax rates the more elastically the formula share responds to tax rate changes. More specifically, equilibrium tax rates are typically lowest when apportionment is based on property-shares, followed by payroll- and sales-shares apportionment. Compared to their cooperative levels, equilibrium tax rates are too low for property-share apportionment but tend to be too high for the other formulas.
KW - Formula apportionment
KW - Tax competition
UR - http://www.scopus.com/inward/record.url?scp=34748872568&partnerID=8YFLogxK
U2 - 10.1007/s10797-006-9017-5
DO - 10.1007/s10797-006-9017-5
M3 - Article
AN - SCOPUS:34748872568
VL - 14
SP - 631
EP - 655
JO - International Tax and Public Finance
JF - International Tax and Public Finance
SN - 0927-5940
IS - 6
ER -