Company taxation and tax spillovers: Separate accounting versus formula apportionment

Nielsen, S. B., Raimondos-Møller, Pascalis, & Schjelderup, G. (2010) Company taxation and tax spillovers: Separate accounting versus formula apportionment. European Economic Review, 54(1), pp. 121-132.

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It is observed in the real world that taxes matter for location decisions and that multinationals shift profits by transfer pricing. The US and Canada use so-called formula apportionment (FA) to tax corporate income, and the EU is debating a switch from separate accounting (SA) to FA. This paper develops a theoretical model that compares basic properties of FA to SA. The focal point of the analysis is how changes in tax rates affect capital formation, input choice, and transfer pricing, as well as on spillovers on tax revenue in other countries. The analysis shows that a move from SA to FA will not eliminate such spillovers and will, in cases identified in the paper, actually aggravate them.

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18 citations in Scopus
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12 citations in Web of Science®

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ID Code: 94012
Item Type: Journal Article
Refereed: Yes
DOI: 10.1016/j.euroecorev.2009.06.005
ISSN: 0014-2921
Copyright Owner: Copyright 2010 Elsevier BV
Deposited On: 22 Mar 2016 04:56
Last Modified: 23 Mar 2016 04:59

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