Reforming the Taxation of Multijurisdictional Enterprises in Europe, 'Coopetition' in a Bottom-Up Federation

41 Pages Posted: 6 Dec 2006

See all articles by Marcel Gerard

Marcel Gerard

Facultes Universitaires Catholiques de Mons (FUCAM); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 2006

Abstract

This paper investigates replacing separate taxation by consolidation and formulary apportionment in a Bottom-up Federation, when a multijurisdictional firm is mobile in various respects. The reform is decided cooperatively by all the jurisdictions or by some of them, while tax rates remain within the competence of each jurisdiction. The paper sets forth the conditions for the reform to be social welfare enhancing, while not increasing tax competition. Among them, the formula should emphasize criteria that the Multijurisdictional Enterprise cannot easily manipulate and the consolidating area should protect its capacity to levy taxes by adopting a crediting system, possibly extended to accrued capital gains, vis-à-vis the rest of the world. Policy conclusions are suggested accordingly.

Keywords: taxation of multinational enterprises, consolidation and formulary apportionment, fiscal federalism

JEL Classification: H32, H73, H87

Suggested Citation

Gerard, Marcel, Reforming the Taxation of Multijurisdictional Enterprises in Europe, 'Coopetition' in a Bottom-Up Federation (November 2006). CESifo Working Paper Series No. 1860. Available at SSRN: https://ssrn.com/abstract=949721

Marcel Gerard (Contact Author)

Facultes Universitaires Catholiques de Mons (FUCAM) ( email )

Chaussee de Binche, 151
Mons 7000
Belgium

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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