From Separate Accounting to Formula Apportionment: Analysis in a Dynamic Framework

Doina Radulescu and Doina Maria Radulescu
Authors registered in the RePEc Author Service: Doina Maria Radulescu

No 2122, CESifo Working Paper Series from CESifo

Abstract: This paper analyzes the switch from Separate Accounting to Formula Apportionment in a dynamic framework. The model features both purely domestic corporations and a domestic multinational which invests at home and abroad as well as a purely foreign corporation and a foreign multinational which invests in the foreign economy as well as in the domestic country. Using such a framework we can show that since the new FA rules apply only to multinational firms, this will affect the domestic activity of purely domestic or foreign corporations since these stick to SA and thus the marginal product of labour and capital will be different for the two firm types. This in turn will affect the investment incentives and distort capital and labour allocation between the different types of enterprises operating in an economy.

Keywords: capital income taxation; separate accounting; formula apportionment; dynamic optimization; multinational firms (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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