The Choice of Apportionment Factors under Formula Apportionment

Marco Runkel () and Guttorm Schjelderup ()

No CESifo Working Paper No. 2072, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper investigates the choice of apportionment factors under a corporate tax system of Formula Apportionment. In contrast to perceived wisdom, we show that the apportionment formula contains both mobile (capital) and immobile (labor) factors if jurisdictions are granted full fiscal autonomy with respect to tax rates and the formula design. A welfare gain can be realized by delegating the decision over apportionment factors to a central planner (centralization), while at the same time allowing jurisdictions fiscal autonomy in setting tax rates. However, the central planner uses the formula as a corrective instrument to internalize fiscal externalities and, therefore, uses mobile apportionment factors as well.

Keywords: corporate income taxation; Formula Apportionment; apportionment factors (search for similar items in EconPapers)
JEL-codes: H25 H71 H87 (search for similar items in EconPapers)
Date: 2007
View list of references

Downloads: (external link)
http://www.cesifo-group.de/DocCIDL/cesifo1_wp2072.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_2072

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich
Address: Poschingerstrasse 5, 81679 Munich
Series data maintained by Julio Saavedra ().