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Tax Enforcement and Tax Havens under Formula Apportionment

Johannes Becker and Clemens Fuest ()

No 07-8, FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge from University of Cologne, FiFo Institute for Public Economics

Abstract: In this paper, we consider optimal tax enforcement policy in the presence of profit shifting towards tax havens. We show that, under separate accounting, tax enforcement levels may be too high due to negative fiscal externalities. In contrast, under formula apportionment, tax enforcement is likely to be too low due to positive externalities of tax enforcement. Our results challenge recent contributions arguing that, under formula apportionment, there is a tendency towards inefficiently high levels of (effective) tax rates.

Keywords: Corporate Taxation; Foreign Direct Investment (search for similar items in EconPapers)
JEL-codes: H25 F23 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-acc and nep-pbe
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https://www.econstor.eu/bitstream/10419/23269/1/FiFo-CPE-DP_07-08.pdf (application/pdf)

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Journal Article: Tax enforcement and tax havens under formula apportionment (2010) Downloads
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