Multinational capital structure and tax competition

Arbeitspapier

This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of the tax competition game is characterized by underprovision of publicly provided goods. Under formula apportionment, the country-specific capital-to-debt ratio of a multinational's affiliate is independent of the jurisdiction's tax rate. Public good provision is either too large or too small. If the debt externality is not negative, there is clearly underprovision under formula apportionment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3041

Classification and Topics

• Classification: Wirtschaft ; Multinational Firms; International Business ; Business Taxes and Subsidies including sales and value-added (VAT) ; Publicly Provided Private Goods ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
• Subject: multinational enterprises ; financial policy ; profit shifting ; corporate taxation ; tax competition ; Körperschaftsteuer ; Steuerwettbewerb ; Formula Apportionment ; Steuerbemessung ; Steuerwirkung ; Multinationales Unternehmen ; Kapitalstruktur ; Öffentliches Gut ; Versorgung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wrede, Matthias
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38993
• Last update: 10.03.2025, 11:45 AM CET