Abstract
This paper examines the 1989–1993 publicly available financial reports of 46 U.S.-based multinationals to estimate the revenue implications of implementing a U.S. federal formula apportionment system. Ignoring behavioral responses, we estimate shifting to an equal-weighted, three-factor formula would have increased their U.S. tax liabilities by 38 percent, with an 81 percent increase for oil and gas firms. We find the firms report a lower percentage of their worldwide profits as American profits than their American share of assets, sales, or payroll. The results may be attributed to more profitable foreign operations, tax-motivated income shifting, or measurement error.
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Shackelford, D., Slemrod, J. The Revenue Consequences of Using Formula Apportionment to Calculate U.S. and Foreign-Source Income: A Firm-Level Analysis. International Tax and Public Finance 5, 41–59 (1998). https://doi.org/10.1023/A:1008664408465
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DOI: https://doi.org/10.1023/A:1008664408465