Evolutionary Tax Competition with Formulary Apportionment

Andreas Wagener

Publication: Working/Discussion PaperWU Working Paper

Abstract

Evolutionary stability is a necessary condition for imitative dynamics of policy learning
and innovation to come to a rest. We apply this concept to profit tax competition
in a regime where a common and consolidated profit tax base for multi-jurisdictional
firms is divided among governments by means of formulary apportionment. In evolutionary
play, governments exhibit aggregate-taking behavior: when comparing
their performance with others, they ignore their impact on the consolidated tax
base. Consequently, evolutionarily stable tax rates are less efficient than tax rates
in best-response tax competition.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Publication statusPublished - 1 Oct 2017

Publication series

NameWU International Taxation Research Paper Series
No.2017-13

WU Working Paper Series

  • WU International Taxation Research Paper Series

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