Tax Enforcement and Tax Havens Under Formula Apportionment

FiFo-CPE Discussion Paper No. 07-8

30 Pages Posted: 24 Sep 2007

See all articles by Johannes Becker

Johannes Becker

University of Cologne

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Date Written: September 18, 2007

Abstract

In this paper, we consider tax enforcement policy in the presence of profit shifting towards tax havens. We show that, under separate accounting, tax enforcement levels may be too high due to negative fiscal externalities. In contrast, under formula apportionment, tax enforcement is likely to be too low due to positive externalities of tax enforcement. Our results challenge recent contributions arguing that, under formula apportionment, there is a tendency towards inefficiently high levels of (effective) tax rates.

Keywords: corporate taxation, foreign direct investment

JEL Classification: H25, F23

Suggested Citation

Becker, Johannes and Fuest, Clemens, Tax Enforcement and Tax Havens Under Formula Apportionment (September 18, 2007). Available at SSRN: https://ssrn.com/abstract=1016115 or http://dx.doi.org/10.2139/ssrn.1016115

Johannes Becker (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

Poschinger Str. 5
Munich, DE 81679
Germany
++89-9224-1430 (Phone)

Ludwig-Maximilians-University, Munich ( email )

Schackstrasse 4 / II
Munich, DE 80539
Germany

Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, DE 80539
Germany
++89 2180-2748 (Phone)
++89 2180-17845 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
142
Abstract Views
1,249
rank
204,461
PlumX Metrics