مالیات شرکت های بزرگ سود، تحرک سرمایه و فرمول تسهیم

The paper develops an analytical framework in which regional governments strategically determine the structure of the corporate profit tax system when an apportionment formula determines the proportion of the firms' income subject to regional taxation. The conclusions can be summarized as follows: (i) Regional governments subsidize capital through the corporate tax system. (ii) Tax rates become higher and the portion of capital costs that can be deducted from taxable income becomes smaller as the formula weighs more production shares. (iii) The regionally provided good may be below or above the efficient level. (iv) The extent of the distortion depends on the particular formula put into practice. (v) Regional governments strictly prefer a formula that exclusively weighs the production proportion to any other alternative.

If a corporation has business activities established in multiple jurisdictions, regions, or countries, 1 then the local authority can levy a tax on income generated in that location. However, measuring income earned within each region raises a difficult conceptual problem. For instance, the current system of corporate taxation in the European Union requires firms to maintain different accounts for its activities in each country where it operates (separate accounting). The US and Canada, on the other hand, have adopted a system of formula apportionment (FA) to allocate income across states. FA, as used in the US, asserts that the proportion of a multi-regional firm’s income earned in a given state is a weighted average of the proportion of the firm’s total sales, property, and payroll in that state. Thus, the firm’s activities in a specific region is approximated by the share of these factors in the region, so the firm is not required to keep different accounts. Specifically, let I denote the set of states where the firm operates. The tax due by a firm to state i ∈ I is T i = t iγ iΩi , where t i is state i’s tax rate, γ i is the share of total profits that are subject to taxation in state i according to the formula selected by that state, and Ωi represents the firm’s taxable profits as defined by state i’s tax law.2 The share γ i is defined by where ki , f i , and wi are property, sales, and payroll in state i, respectively; miq is the weight given to factor q = K,W,F in the apportionment formula in state i, such that 0  miq  1, and miK +miF +miW = 1; and αiq is the share of factor q in state i. Table 1 shows the weights miq chosen by different states in the US in 2003. It is clear from the table that states do not follow the same principle when choosing the apportionment method.3 Even though this method of apportionment is relatively easy to administer, it creates very complicated incentive effects. On one hand, firms operating in different regions react to different formulas by changing the allocation of property, sales and workers across regions. On the other hand, given that the tax policy chosen by different regional governments affects residents of other states, some kind of strategic interaction can be expected. An additional problem arises when regions are allowed to choose their own FA systems. If they all adopt the same formula, exactly 100 percent of a corporation’s income will be apportioned across states.4 Non-uniformity, however, can result in more or less than 100 percent of a corporation’s income being subject to state income tax.5 In an effort to encourage tax uniformity across jurisdictions in the US, the Multistate Tax Compact (1967) established that the three factors considered in the apportionment formula are to be weighted equally (miK = miF = miW = 1/3 for all regions i). In spite of this, most states have recently deviated from the uniform apportionment formula and moved towards a greater weight on the sales portion of the corporate income tax, as shown in Table 1. It has been claimed that by manipulating the formula in this way, officials can offer tax breaks that help the economic development of the region. However, if more states pass such legislation, other states will be compelled to do the same, initiating a “race to the bottom,” in which all states end up imposing the same (lower) tax liability.6 The present paper develops a theoretical framework, built on the analysis of Gordon and Wilson [8], that focuses on the issues described above. In our setup, regional governments face the problem of deciding the structure of their corporate profit tax system in a context of strategic interaction, when firms simultaneously operate in many regions at the same time, and profits are regionally apportioned using a FA system. The tax revenue is devoted to finance the provision of a regional good.7 Much of the tax incidence literature,8 adopts the interpretation that a corporate profit tax is ultimately a tax on capital in the corporate sector. The argument essentially develops around the fact that taxable profits may differ from actual economic profits. The ways in which these two concepts differ can be attributed to many different and complicated factors.9 In this paper, such discrepancy is explicitly considered by assuming that the tax base (i.e., the corporate taxable income) includes both pure profits plus a portion of capital costs.10 Our setup, however, also considers the possibility of capital subsidization through the corporate tax system. The latter will take place if the portion of capital expenditures that can be deducted from taxable income exceeds the true capital costs. Furthermore, it is assumed that regional tax authorities can implement different policies in terms of the portion of capital costs that can be deducted from taxable income and the portion that is computed as part of the tax base. Consequently, regions have some control over the size of the taxable income. The analysis is carried out in two steps. In the first step, the equilibrium tax structure for different exogenously given FA systems is derived. This means that each region chooses the corporate tax rate and the corporate tax base (basically determined by the proportion of capital costs that can be deducted from taxable income), but takes the FA system as exogenous. In this way, we are able to compare equilibrium tax structures and evaluate the effect on economic welfare of using different formulas. In the second step, we also allow regional governments to select their own formulas in a non-cooperative way and derive the FA system chosen in equilibrium.11 The model focuses the analysis on the conditions arising at a symmetric equilibrium. The approach is justified on the grounds that our goal is to explain the general trend, as observed for example in the US, to use formulas that rely less on capital shares and more on output shares.12 It is outside the scope of our paper to explain how the specific characteristics of a state, region, or country determine the choice of a particular formula.13 The paper addresses a number of policy-related issues. First, the model shows the trade-off faced by regional governments deciding between different tax instruments (tax rate levels, proportion of capital costs that can be deducted from taxable income, and the choice of a specific formula). Second, it allows us to determine whether tax competition in terms of FA systems actually lead to a “race to the bottom” as observed in the property tax competition literature.14 Finally, it provides a conceptual framework that can be used, for instance, to evaluate the recent shift towards a FA system predominantly based on sales shares, as verified in the US. A few papers have formally studied the implications of using apportionment formulas to allocate taxable income across jurisdictions. In general, given the complexity of the issue under study, it has been extremely difficult for the literature in this area to provide clear and unambiguous conclusions. The earlier papers by McLure [15,16], Goolsbee and Maydew [7], and Mieszkowski and Zodrow [18] first elucidated that formally apportionment mostly transforms the state corporate income tax into three separate taxes on the factors in the apportionment formula. Gordon and Wilson [8] examine the response of firms to a system of formula apportionment, restricting attention to cases in which all states use the same system, with different corporate tax rates. Most of their analysis is concerned with the component of the tax tied to the allocation of property (i.e., miF = miW = 0 for all regions i). The setup of our theoretical model is also related to Pethig and Wagener [22], Kolmar and Wagener [13], and Mintz and Smart [19].15 All these papers, however, assume that the formulas are exogenously given and do not consider the endogenous choice of tax bases by regional tax authorities. Anand and Sansing [1] provide an explanation for why states may choose different apportionment methods, even though aggregate social welfare is maximized when states use the same formulas. They demonstrate analytically that “importing” states have incentives to increase sales factor weights, while “exporting” states have incentives to reduce the weights on productive factors. The results are explained by the fact that they assume that some inputs are completely immobile. One limitation of their analysis is that they assume that tax rates and tax bases are not only exogenously given but also equal across regions.16 Our paper, on the other hand, endogenizes the choice of tax rates, tax bases, and formulas in a context of strategic competition. The organization of the paper is as follows. Section 2 derives the optimal corporate tax policy when a central government is in charge of designing the corporate tax system. The corporate profit tax base for a central government is the sum of the firm’s profits in each region, so a FA system to allocate profits across regions is not required in this case. The framework developed in this section will serve as our benchmark case. In Section 3, we derive the equilibrium corporate tax policy under different FA systems, and in Section 4, we allow regional governments to choose their own formulas. Finally, Section 5 concludes.

States and countries that finance part of its activities with a corporate profit tax face the problem of measuring corporations’ tax liabilities to each region. The use of a FA to allocate income across locations introduces very complicated incentive effects for both the firms that operate in different jurisdictions and for local governments that shape the structure of the corporate tax system. The paper considers a tax competition model with respect to corporate profit taxes, tax bases, and FA systems, and analyzes the consequences, in terms of economic welfare, of adopting different alternatives. Despite the complexity of the analysis, the model has been able to establish some unambiguous results. First, for every FA system, regional authorities will allow firms to deduct more than the optimal amount of capital expenditures from taxable income, i.e., they will tend to subsidize capital through the corporate tax system. By following this strategy, the regional government can attract more capital into their regions. Second, governments that use a FA system that only weighs production (or sales) shares choose higher corporate tax rates and allow a smaller portion of capital costs to be deducted from taxable income. This finding is partially explained by the fact that capital is more responsive to a change in the tax rate when the formula weighs more heavily capital shares. Third, the strategic competition between regional governments leads to an outcome that is consistent with both underprovision or overprovision of the regionally provided good. The importance of these distortions depend on the specific formula put into practice. Finally, if regional governments are allowed to design their own formulas, they will choose one that fully weighs production (or sales) shares. The paper has some interesting policy implications. For instance, the model can be use to evaluate the recent shift by most states in the US to a FA that gives more importance to production (or sales). According to the conclusions of our work, it is not clear that this process can be considered a “race to the bottom” where strategic competition leads to underprovision of the regionally provided good. In fact, a shift towards a formula that weighs more heavily production shares is consistent with both underprovision, or even overprovision, of the good. It is possible to explain the generalized shift in the formula as an attempt by regional governments to implement “higher levels” of local public goods.