Corporate tax systems and cross country profit shifting : formula apportionment vs. separate accounting

摘要

This paper shows in a symmetric tax competition model that a formulaapportionment system can attain the first best welfare optimum without anypolitical pre-agreed harmonization or coordination of tax bases and tax rates.The same result cannot be obtained under separating accounting even if countriesagree on both tax rates and bases. The efficiency of company tax reformtherefore requires more political cohesion under separate accounting than formulaapportionment and yields lower welfare.