Tax enforcement and tax havens under formula apportionment

Becker J, Fuest C


Abstract
In this paper, we consider optimal tax enforcement policy in the presence of profit shifting toward tax havens. We show that, under separate accounting, tax enforcement levels may be too high due to negative fiscal externalities. In contrast, under formula apportionment, tax enforcement is likely to be too low due to positive externalities of tax enforcement. Our results challenge recent contributions arguing that, under formula apportionment, there is a tendency toward inefficiently high levels of (effective) tax rates.

Keywords
Corporate taxation Foreign direct investment corporate-income european-union competition taxation multinationals evasion reform firms



Publication type
Article in Journal

Publication status
Published

Year
2010

Journal
INTERNATIONAL TAX AND PUBLIC FINANCE

Volume
17

Issue
3

Start page
217

End page
235

Pages range
217-235

Language
English

ISSN
0927-5940

Affiliation
Univ Oxford, Univ Oxford