Asymmetric tax competition with formula apportionment

Matthias Wrede

Letters in Spatial and Resource Sciences, 2014, vol. 7, issue 1, 47-60

Abstract: This paper analyzes asymmetric tax competition under formula apportionment. It sets up a model with multinationals where two welfare-maximizing jurisdictions of different size levy source-based corporate taxes and allocate taxes using the formula approach. At the Nash equilibrium, tax rates are too low and public goods quantities are too small. The paper shows that the (marginally) larger country levies a larger tax rate compared to the smaller country. Citizens of the larger country are worse off than those of the smaller country. The larger country employs inefficiently little capital. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Multinational enterprises; Corporate taxation; Formula apportionment; Asymmetric tax competition; H25; H42; H73 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Asymmetric Tax Competition with Formula Apportionment (2009)
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DOI: 10.1007/s12076-013-0100-0

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