Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18880
Authors: 
Kind, Hans Jarle
Midelfart, Karen Helene
Schjelderup, Guttorm
Year of Publication: 
2004
Series/Report no.: 
CESifo Working Paper 1241
Abstract: 
Multinational firms are known to shift profits and countries are known to compete over shifty profits. Two major principles for corporate taxation are Separate Accounting (SA) and Formula Apportionment (FA). These two principles have very different qualities when it comes to preventing profit shifting and preserving national tax autonomy. Most OECD countries use SA. In this paper we show that a reduction in trade barriers lowers equilibrium corporate taxes under SA, but leads to higher taxes under FA. From a welfare point of view the choice of tax principle is shown to depend on the degree of economic integration.
Subjects: 
multinational enterprises
economic integration
trade costs
international tax competition
tax regimes
JEL: 
H87
H25
F23
F15
Document Type: 
Working Paper

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