Resource title

The choice of apportionment factors under formula apportionment

Resource image

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Resource description

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.

Resource author

Marco Runkel, Guttorm Schjelderup

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26117

Resource license

Adapt according to the presented license agreement and reference the original author.