Corporate income taxation of multinationals and unemployment

Thomas Eichner and Marco Runkel ()

Regional Science and Urban Economics, 2009, vol. 39, issue 5, 610-620

Abstract: Within a two-country model with involuntary unemployment, this paper investigates corporate income taxation under separate accounting versus formula apportionment. In contrast to separate accounting, under formula apportionment the corporate tax policy causes a fiscal externality that results from unemployment. This externality is the highest when the apportionment formula contains the payroll factor only. It is minimized for the pure sales (property) formula, if the substitution elasticity is low (high). The unemployment externality tends to compensate other externalities such that tax rates become inefficiently low. The deviation from the efficient tax policy is minimized when the apportionment formula contains the sales factor only.

Keywords: Separate; accounting; Formula; apportionment; Unemployment (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (7)

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Working Paper: Corporate Income Taxation of Multinationals and Unemployment (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:39:y:2009:i:5:p:610-620

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