IDEAS home Printed from https://ideas.repec.org/h/spr/prbchp/978-3-319-68762-9_1.html
   My bibliography  Save this book chapter

The Impact of Corporate Income Taxation on Location Choice of Investments: Separate Accounting Versus Formula Apportionment

In: The Impact of Globalization on International Finance and Accounting

Author

Listed:
  • Hulya Celebi

    (University of Innsbruck, Auditing and Taxation)

Abstract

This paper investigates the impact of separate accounting (SA) versus that of formula apportionment (FA) on investment decisions in high- and low-corporate income tax countries. As the investment decisions of multinational enterprises are commonly taken by managers and not by owners, the focus is on the impact of SA versus that of FA on the investment location decided by managers. This is done within the framework of the principal-agent setting, where a Monte Carlo simulation is carried out. Considering taxation under SA supports investing in a less risky investment, even if it is located in the country with the highest tax rate. In analysis of FA, allocation of the tax base based on formula and the cross-border loss offset encourages investing in a risky investment. This is in line with the aim of the European Commission regarding making investments more attractive and supporting cross-border investments within the EU. These results also show that the delegation of investment decisions to managers facilitates the investment in the high-tax country, under both systems, SA as well as FA. As a contribution to the literature reviewed, this study demonstrates that taking the differences in expected returns of investments across the countries, as well as the risk-averse behavior of investors, into account, reveals different impacts of taxation on the invested amount under SA and FA.

Suggested Citation

  • Hulya Celebi, 2018. "The Impact of Corporate Income Taxation on Location Choice of Investments: Separate Accounting Versus Formula Apportionment," Springer Proceedings in Business and Economics, in: David Procházka (ed.), The Impact of Globalization on International Finance and Accounting, pages 1-14, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-68762-9_1
    DOI: 10.1007/978-3-319-68762-9_1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:prbchp:978-3-319-68762-9_1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.