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Symmetric Tax Competition under Formula Apportionment
Author(s) -
Eggert Wolfgang,
Schjelderup Guttorm
Publication year - 2003
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1467-9779.00141
Subject(s) - tax competition , economics , apportionment , capital (architecture) , residence , monetary economics , indirect tax , microeconomics , tax reform , outcome (game theory) , public economics , demographic economics , political science , law , history , archaeology
This paper compares property taxation to a corporate income tax based on formula apportionment in a model where identical countries compete to attract capital. We find that if countries can pair a residence–based capital tax with a property tax (source tax on capital) the tax equilibrium is efficient. In contrast, the use of a 2–factor FA scheme based on sales and capital combined with a residence–based capital tax leads to an inefficient outcome.