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| Author: | Eichner, T. Runkel, M. |
| Title: | Corporate income taxation of multinationals in a general equilibrium model |
| Journal: | Journal of Public Economics
2011 : AUG, VOL 95:7-8 p. 723-733 |
| Index terms: | models government jurisdiction company taxation multinational companies |
| Freeterms: | Separate Accounting Formula Apportionment |
| Language: | eng |
| Abstract: | This study contributes to the discussion on the rivalry between Separate Accounting and Formula Apportionment in the corporate income taxation of multinational enterprises. The innovation is that we review a general equilibrium tax competition model with an endogenous interest rate. Contrary to previous studies, we demonstrate that tax rates are inefficiently low under both Separate Accounting and also Formula Apportionment. Moreover, a wide range of empirically relevant cases are identified, where Formula Apportionment is superior to Separate Accounting, regardless of the magnitude of the concealment profit shifting cost. The reason behind the change in results is that one country's tax rate affects other countries additionally via the changing interest rates. |
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