Asymmetric tax competition with formula apportionment

Wrede, Matthias

doi:10.1007/s12076-013-0100-0

Cited by 3 publications

(3 citation statements)

References 27 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Even though country asymmetries have been investigated in each of these extensions (e.g. Bucovetsky & Smart, ; Wrede, ), the combination of both extensions renders the analysis of country asymmetries in our framework analytically intractable.…”

Section: Asymmetric Countriesmentioning

confidence: 99%

Equalizing tax bases or tax revenues under tax competition? The role of formula apportionment

Liesegang¹,

Runkel

2018

J Public Economic Theory

View full text Add to dashboard Cite

This paper contributes to the literature on fiscal equalization and corporate tax competition. The innovation is that we explicitly model multinational enterprises and a corporate tax system that is designed according to formula apportionment. Two main results are obtained. First, in contrast to previous studies we identify cases where tax revenue equalization is better in mitigating detrimental tax competition than tax base equalization. Second, tax base equalization nevertheless has the advantage that it may render tax rates efficient, depending on the shape of the apportionment formula. A pure payroll formula does not ensure efficiency, but a back‐of‐the‐envelope calibration of our model to Canadian provinces suggests that a pure sales formula may be optimal.

show abstract

Section: Asymmetric Countriesmentioning

confidence: 99%

Equalizing tax bases or tax revenues under tax competition? The role of formula apportionment

Liesegang¹,

Runkel

2018

J Public Economic Theory

View full text Add to dashboard Cite

show abstract

“…19 To illustrate this point, let us suppose that governments care for the well-being of a representative citizen in their countries. The approach is inspired by Pinto (2007), Wrede (2014) or Matsumoto (2016).…”

Section: Welfare Maximizationmentioning

confidence: 99%

“…The assumption is not easily replaced, however. First, tax competition with formulary apportionment and asymmetric players is notoriously complex to analyze in itself (Wrede, 2014). 20 Moreover, imitative learning among asymmetric agents is a conceptually tricky issue (Alós-Ferrer and Schlag, 2009).…”

mentioning

confidence: 99%

Evolutionary Tax Competition with Formulary Apportionment

Wagener

2017

SSRN Journal

View full text Add to dashboard Cite

CCCTB: the employment factor game

Eberhartinger

Petutschnig

2015

Eur J Law Econ

View full text Add to dashboard Cite

The draft for a Common Consolidated Corporate Tax Base Directive in the European Union includes the suggestion for an apportionment formula which allocates taxable group profits to group member corporations. These allocated profits shall then be taxed in the respective MemberStates. The draft directive delegates the right to define one factor of the apportionment formula, the term 'Employee' to the Member States, who are therefore free to choose a narrow or a broad definition, the latter including also atypical employment schemes. Using a game-theoretic approach the paper shows that the individually rational strategy of any Member State to define 'Employee' broadly so as to maximize the volume of the apportionment factor and thus maximize the allocated share of taxable income is only the best solution when tax rate differences and differences in the volume of atypical employment schemes are disregarded. If such differentials and the corporate groups' reactions to different Member States' definitions are included in modelling the game's payoffs a narrow definition of 'Employee' yields the highest individual pay-offs to the Member States involved. This change of dominant strategies is triggered by the corporate group's shifting of the employment factor from high-tax to low-tax Member States. Our paper differs from previous research on the economic effects of the CCCTB apportionment formula as it is the first paper identifying and analysing the employment factor and its distorting effects. The paper discusses possible tax minimizing strategies for corporate groups by shifting workforce and develops a model to quantify these potential relocations. Furthermore the paper presents advice to policy makers in their 'Employee' definition decision and shows how Member States could use this definition to both minimize outward factor shifting and maximize inward factor shifting.

show abstract

Asymmetric tax competition with formula apportionment

Cited by 3 publications

References 27 publications

Equalizing tax bases or tax revenues under tax competition? The role of formula apportionment

Equalizing tax bases or tax revenues under tax competition? The role of formula apportionment

Evolutionary Tax Competition with Formulary Apportionment

CCCTB: the employment factor game

Contact Info

Product

Resources

About