Revisiting Global Formulary Apportionment
Susan C. Morse
University of Texas at Austin - School of Law
May 28, 2010
Virginia Tax Review, Vol. 29, p. 593, 2010
This Article examines global destination sales-based formulary apportionment (“DSFA”). It questions whether unilateral U.S. adoption of a DSFA tax would prompt other countries to follow suit, identifying on one hand factors that could encourage a productive capacity shift to the DSFA-adopting jurisdiction and on the other hand origin-based incentives such as business-to-business sales that could encourage the movement of capital investment to jurisdictions other than the adopting jurisdiction. It also analyzes several points of comparison between a globally adopted DSFA tax and the existing separate accounting corporate tax system. These include the potential of transfer pricing and other reform efforts to improve the current system baseline; the continued economic dislocation costs of origin-based and cross-border merger incentives under global DSFA; the costs of global negotiation, compliance and administration; and the limitations of a norm of international corporate taxation for the future evolution of the U.S. corporate income tax. As I plan to explore in future work, the uncertainty and inflexibility of outcomes resulting from broad global reform efforts suggests that incremental measures – which could include formulary and cooperative elements – may provide a better approach to international corporate income tax reform.
Number of Pages in PDF File: 52Accepted Paper Series
Date posted: May 29, 2010 ; Last revised: November 14, 2012
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