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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/38993
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| Title: | | Multinational capital structure and tax competition  |
| Authors: | | Wrede, Matthias |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper Public Finance 3041 |
| Abstract: | | This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of the tax competition game is characterized by underprovision of publicly provided goods. Under formula apportionment, the country-specific capital-to-debt ratio of a multinational's affiliate is independent of the jurisdiction's tax rate. Public good provision is either too large or too small. If the debt externality is not negative, there is clearly underprovision under formula apportionment. |
| Subjects: | | multinational enterprises financial policy profit shifting corporate taxation tax competition |
| JEL: | | F23 H25 H42 H73 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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