Tax Enforcement and Tax Havens under Formula Apportionment
نویسندگان
چکیده
In this paper, we consider optimal tax enforcement policy in the presence of pro t shifting towards tax havens. We show that, under separate accounting, tax enforcement levels may be too high due to negative scal externalities. In contrast, under formula apportionment, tax enforcement is likely to be too low due to positive externalities of tax enforcement. Our results challenge recent contributions arguing that, under formula apportionment, there is a tendency towards ine¢ ciently high levels of (e¤ective) tax rates.
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