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Title:The choice of apportionment factors under formula apportionment PDF Logo
Authors:Runkel, Marco
Schjelderup, Guttorm
Issue Date:2007
Series/Report no.:CESifo working paper 2072
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.
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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