DP2753 Corporate Taxation, Multinational Enterprise and Economic Integration
|Author(s):||Hans Jarle Kind, Guttorm Schjelderup, Karen-Helene Ulltveit-Moe|
|Publication Date:||March 2001|
|Keyword(s):||Economic Integration, International Tax Competition, Multinational Enterprises, Tax Regimes|
|JEL(s):||F15, F23, H25, H87|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2753|
This Paper studies how economic integration affects transfer pricing, tax policy and welfare, when multinationals are taxed either according to formula apportionment (FA) or separate accounting (SA). It is shown that economic integration induces multinationals to lower their transfer prices under both tax systems, but that transfer prices become less tax sensitive under FA than under SA. A main result of the paper is that economic integration lowers tax rates in the Nash equilibrium under SA, but leads to higher taxes in the Nash equilibrium under FA.