Novel Configuration of Formulary Apportionment Using the Correlated Random Effect Approach

Markéta Mlčúchová

Politická ekonomie, 2024, vol. 2024, issue 1, 73-101

Abstract: This paper examines various configurations of the formula under the formulary apportionment methodology from the perspective of the explanatory power of the variability in profitability of multinational companies with the aim to identify the best-performing formula based on analytical evidence of panel microeconomic data. The considered configurations of the formula are based on the novel composition of the allocation formula indicated under the BEFIT proposal, preceding the CCCTB proposal, and traditionally used formulas, at the sub-national level, in Canada and the United States. The empirical analysis uses microeconomic panel data obtained from the Orbis database for 77,087 subsidiaries affiliated with 2,283 parent companies observed from 2011 to 2020. Utilising the correlated random effect approach, accounting for time-specific effects, including the time-constant explanatory variables such as economic activity, classified by NACE codes and the EU Member States' jurisdiction, this paper devises a novel formula configuration. Besides a novel configuration of the apportionment formula, consisting of sales, costs of employees, tangible and intangible assets, this paper estimates proportional weights of apportionment factors and concludes with policy recommendations.

Keywords: Corporate taxation; formulary apportionment; correlated random effect (search for similar items in EconPapers)
JEL-codes: C23 H25 K34 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://polek.vse.cz/doi/10.18267/j.polek.1411.html (text/html)
http://polek.vse.cz/doi/10.18267/j.polek.1411.pdf (application/pdf)
free of charge

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: https://EconPapers.repec.org/RePEc:prg:jnlpol:v:2024:y:2024:i:1:id:1411:p:73-101

Ordering information: This journal article can be ordered from
Redakce Politické ekonomie, Vysoká škola ekonomická, nám. W. Churchilla 4, 130 67 Praha 3
http://polek.vse.cz

DOI: 10.18267/j.polek.1411

Access Statistics for this article

Politická ekonomie is currently edited by Jiřina Bulisová

More articles in Politická ekonomie from Prague University of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().