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 formula is predominately based on capital shares and if there is a positive debt externality there is clearly underprovision under formula apportionment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 2009,34

Classification and Topics

• Classification: Wirtschaft ; 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

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wrede, Matthias
• Event: Veröffentlichung
• (who): Philipps-University Marburg, Faculty of Business Administration and Economics
• (where): Marburg
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/30123
• Last update: 10.03.2025, 11:43 AM CET