Efficient tax competition under formula apportionment without the sales factor

Thomas Eichner () and Marco Runkel ()
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Thomas Eichner: University of Hagen

Economics Bulletin, 2012, vol. 32, issue 4, 2828-2838

Abstract: Within a tax competition framework, this note points out that the tax principle of Formula Apportionment may render corporate income taxation of multinational enterprises efficient even if a sales apportionment factor is not available. This is shown for constant returns to scale production functions with substitution elasticity greater than or equal to one. In the special case of a Cobb-Douglas production function, efficiency is attained either if the formula uses only payroll or if the formula weights on production inputs equal these inputs' production elasticities.

Keywords: tax competition; Formula Apportionment; sales factor (search for similar items in EconPapers)
JEL-codes: H7 (search for similar items in EconPapers)
Date: 2012-10-09
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Citations: View citations in EconPapers (2)

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