Profit Tax Competition and Formula Apportionment

Rüdiger Pethig and Andreas Wagener

Volkswirtschaftliche Diskussionsbeiträge from Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht

Abstract: We analyse tax competition with corporate profit taxes in a common market where tax revenues are allocated according to an apportionment formula. As a general rule, tax competition is sharper the higher is the tax elasticity of the apportionment formula which, in turn, depends on the properties of production technologies. In particular: (i) If labour input is fixed, tax competition is sharpest if apportionment is based on property shares, followed by the sales and payroll shares. (ii) If capital and labour are endogenous and technologies are Cobb-Douglas, tax competition under the property- and the payroll-share rule is sharper than under the output-share formula. Whether payroll- or property-share apportionment generates sharper tax competition, depends on factor elasticities.

Keywords: Tax Competition; Formula Apportionment (search for similar items in EconPapers)
JEL-codes: D21 D81 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2003
New Economics Papers: this item is included in nep-pub
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Citations: View citations in EconPapers (25)

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http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/106-03.pdf (application/pdf)

Related works:
Journal Article: Profit tax competition and formula apportionment (2007)
Working Paper: Profit Tax Competition and Formula Apportionment (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:106-03

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