Evolutionary Tax Competition with Formulary Apportionment

45 Pages Posted: 4 Dec 2017

See all articles by Andreas Wagener

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

Date Written: October 1, 2017

Abstract

Evolutionary stability is a necessary condition for imitative dynamics of policy learning and innovation to come to a rest. We apply this concept to profit tax competition in a regime where a common and consolidated profit tax base for multi-jurisdictional firms is divided among governments by means of formulary apportionment. In evolutionary play, governments exhibit aggregate-taking behavior: when comparing their performance with others, they ignore their impact on the consolidated tax base. Consequently, evolutionarily stable tax rates are less efficient than tax rates in best-response tax competition.

Keywords: Imitation and Learning, Tax Competition, Formulary Apportionment, CCCTB

JEL Classification: H77, H25, F23, C73

Suggested Citation

Wagener, Andreas, Evolutionary Tax Competition with Formulary Apportionment (October 1, 2017). WU International Taxation Research Paper Series No. 2017-13. Available at SSRN: https://ssrn.com/abstract=3078969 or http://dx.doi.org/10.2139/ssrn.3078969

Andreas Wagener (Contact Author)

Leibniz Universität Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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