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Symmetric Tax Competition under Formula Apportionment

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  • Wolfgang Eggert
  • Guttorm Schjelderup

Abstract

This paper compares property taxation to a corporate income tax based on formula apportionment in a model where identical countries compete to attract capital. We find that if countries can pair a residence–based capital tax with a property tax (source tax on capital) the tax equilibrium is efficient. In contrast, the use of a 2–factor FA scheme based on sales and capital combined with a residence–based capital tax leads to an inefficient outcome.

Suggested Citation

  • Wolfgang Eggert & Guttorm Schjelderup, 2003. "Symmetric Tax Competition under Formula Apportionment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 439-446, April.
    • Handle: RePEc:bla:jpbect:v:5:y:2003:i:2:p:439-446
    DOI: 10.1111/1467-9779.00141
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    References listed on IDEAS

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    1. Anand, Bharat N. & Sansing, Richard, 2000. "The Weighting Game: Formula Apportionment as an Instrument of Public Policy," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 183-200, June.
    2. Goolsbee, Austan & Maydew, Edward L., 2000. "Coveting thy neighbor's manufacturing: the dilemma of state income apportionment," Journal of Public Economics, Elsevier, vol. 75(1), pages 125-143, January.
    3. Erkki Koskela & Ronnie Schöb, 2002. "Optimal Factor Income Taxation in the Presence of Unemployment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 387-404, July.
    4. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, "undated". "Tax Spillovers under Separate Accounting and Formula Apportionment," EPRU Working Paper Series 01-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    5. Michael Keen & David E. Wildasin, 2000. "Pareto Efficiency in International Taxation," CESifo Working Paper Series 371, CESifo.
    6. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    7. Anand, Bharat N. & Sansing, Richard, 2000. "The Weighting Game: Formula Apportionment as an Instrument of Public Policy," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(2), pages 183-200, June.
    8. Gordon, Roger H & Wilson, John Douglas, 1986. "An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment," Econometrica, Econometric Society, vol. 54(6), pages 1357-1373, November.
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