Uncertainty in Weighting Formulary Apportionment Factors and its Impact on After-Tax Income of Multinational Groups

WU International Taxation Research Paper Series No. 2015 - 10

Die Betriebswirtschaft 03/2015, 161-177

32 Pages Posted: 25 Feb 2015 Last revised: 20 Jul 2015

See all articles by Regina Ortmann

Regina Ortmann

University of Paderborn; Vienna University of Economics and Business

Date Written: 2015

Abstract

Formulary apportionment is an intensively debated mechanism for allocating tax base within multinational groups. Systems under which the formula is identical in all jurisdictions and systems under which jurisdictions can determine the weights on the formula factors individually can be observed. The latter systems produce uncertainty about the overall tax-liable share of the future group tax base. Counter-intuitively, I identify scenarios under which increased uncertainty leads to higher expected future group income. My results provide helpful insights for firms and policy makers debating the specific design of a formulary apportionment system.

Keywords: CCCTB, factor weights, formulary apportionment, tax uncertainty

Suggested Citation

Ortmann, Regina, Uncertainty in Weighting Formulary Apportionment Factors and its Impact on After-Tax Income of Multinational Groups (2015). WU International Taxation Research Paper Series No. 2015 - 10, Die Betriebswirtschaft 03/2015, 161-177, Available at SSRN: https://ssrn.com/abstract=2521386 or http://dx.doi.org/10.2139/ssrn.2521386

Regina Ortmann (Contact Author)

University of Paderborn ( email )

Warburger Str. 100
Paderborn, D-33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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