Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83191
Authors: 
Pethig, Rüdiger
Wagener, Andreas
Year of Publication: 
2003
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge 106-03
Abstract: 
We analyse tax competition with corporate profit taxes in a common market where tax revenues are allocated according to an apportionment formula. As a general rule, tax competition is sharper the higher is the tax elasticity of the apportionment formula which, in turn, depends on the properties of production technologies. In particular: (i) If labour input is fixed, tax competition is sharpest if apportionment is based on property shares, followed by the sales and payroll shares. (ii) If capital and labour are endogenous and technologies are Cobb-Douglas, tax competition under the property- and the payroll-share rule is sharper than under the output-share formula. Whether payroll- or property-share apportionment generates sharper tax competition, depends on factor elasticities.
Subjects: 
Tax Competition
Formula Apportionment
JEL: 
D81
D21
Document Type: 
Working Paper

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