The Choice of Apportionment Factors under Formula Apportionment

Marco Runkel () and Guttorm Schjelderup

No 2072, CESifo Working Paper Series from CESifo

Abstract: This paper investigates the choice of apportionment factors under a corporate tax system of Formula Apportionment. In contrast to perceived wisdom, we show that the apportionment formula contains both mobile (capital) and immobile (labor) factors if jurisdictions are granted full fiscal autonomy with respect to tax rates and the formula design. A welfare gain can be realized by delegating the decision over apportionment factors to a central planner (centralization), while at the same time allowing jurisdictions fiscal autonomy in setting tax rates. However, the central planner uses the formula as a corrective instrument to internalize fiscal externalities and, therefore, uses mobile apportionment factors as well.

Keywords: corporate income taxation; Formula Apportionment; apportionment factors (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: THE CHOICE OF APPORTIONMENT FACTORS UNDER FORMULA APPORTIONMENT (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2072

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