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Asymmetric Tax Competition with Formula Apportionment

Matthias Wrede ()

No 200943, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

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 larger country levies a larger tax rate compared to the smaller country as it does under separate accounting. Citizens of the larger country are worse off than those of the smaller country.

Keywords: Multinational enterprises; corporate taxation; formula apportionment; asymmetric tax competition. (search for similar items in EconPapers)
JEL-codes: H25 H42 H73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
Date: 2009
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http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/43-2009_wrede.pdf First version, 2009 (application/pdf)

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Journal Article: Asymmetric tax competition with formula apportionment (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200943

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