Corporate Tax Systems, Multinational Enterprises, and Economic Integration

26 Pages Posted: 6 Aug 2004

See all articles by Guttorm Schjelderup

Guttorm Schjelderup

NHH Norwegian School of Economics - Department of Business and Management Science

Hans Jarle Kind

Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute); NHH Norwegian School of Economics - Department of Economics

Karen Helene Ulltveit-Moe

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: July 2004

Abstract

Multinational firms are known to shift profits and countries are known to compete over shifty profits. Two major principles for corporate taxation are Separate Accounting (SA) and Formula Apportionment (FA). These two principles have very different qualities when it comes to preventing profit shifting and preserving national tax autonomy. Most OECD countries use SA. In this paper we show that a reduction in trade barriers lowers equilibrium corporate taxes under SA, but leads to higher taxes under FA. From a welfare point of view the choice of tax principle is shown to depend on the degree of economic integration.

Keywords: multinational enterprises, economic integration, trade costs, international tax competition, tax regimes

JEL Classification: F15, F23, H25, H87

Suggested Citation

Schjelderup, Guttorm and Kind, Hans Jarle and Ulltveit-Moe, Karen Helene, Corporate Tax Systems, Multinational Enterprises, and Economic Integration (July 2004). Available at SSRN: https://ssrn.com/abstract=573261 or http://dx.doi.org/10.2139/ssrn.573261

Guttorm Schjelderup (Contact Author)

NHH Norwegian School of Economics - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Hans Jarle Kind

Norwegian School of Economics & Business Administration (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 583 890 (Phone)
+47 55 583 901 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

NHH Norwegian School of Economics - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Karen Helene Ulltveit-Moe

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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