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From Separate Accounting to Formula Apportionment: Analysis in a Dynamic Framework

Author

Listed:
  • Doina Radulescu
  • Doina Maria Radulescu
Abstract
This paper analyzes the switch from Separate Accounting to Formula Apportionment in a dynamic framework. The model features both purely domestic corporations and a domestic multinational which invests at home and abroad as well as a purely foreign corporation and a foreign multinational which invests in the foreign economy as well as in the domestic country. Using such a framework we can show that since the new FA rules apply only to multinational firms, this will affect the domestic activity of purely domestic or foreign corporations since these stick to SA and thus the marginal product of labour and capital will be different for the two firm types. This in turn will affect the investment incentives and distort capital and labour allocation between the different types of enterprises operating in an economy.

Suggested Citation

  • Doina Radulescu & Doina Maria Radulescu, 2007. "From Separate Accounting to Formula Apportionment: Analysis in a Dynamic Framework," CESifo Working Paper Series 2122, CESifo.
    • Handle: RePEc:ces:ceswps:_2122
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp2122.pdf
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    References listed on IDEAS

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    2. Søren Bo Nielsen & Pascalis Raimondos–Møller & Guttorm Schjelderup, 2003. "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 419-437, April.
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    5. Marcel Gérard & Joann Weiner, 2003. "Cross-Border Loss Offset and Formulary Apportionment: How do they affect multijurisdictional firm investment spending and interjurisdictional tax competition ?," CESifo Working Paper Series 1004, CESifo.
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    9. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, "undated". "Tax Spillovers under Separate Accounting and Formula Apportionment," EPRU Working Paper Series 01-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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    Cited by:

    1. Кокорева Мария Сергеевна & Степанова Анастасия Николаевна, 2012. "Financial architecture and corporate performance: evidence from Russia," Journal of Corporate Finance Research Корпоративные финансы, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», issue 2 (22), pages 34-44.

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