Can and should governments limit competition in the taxation of corporation income, and if so, why and how? Explicit or implicit coordination in the determination of tax rates and division of tax bases, while possible, is difficult. Historical experience suggests that greater uniformity of policies over space is more effectively achieved through the emergence of new, higher-level institutions. Heckscher's analysis of the mercantilist period illustrates the role of nation-states in the upward-reallocation of policymaking authority from lower-level governments. More recently, the taxation of corporation income by US states shows little indication of explicit coordination; upward assignment (to the Federal government) of principal authority for corporation income taxation has served as a far more effective form of "cooperation by delegation" in the US. Modern public finance views the corporation income tax primarily as a means through which governments can achieve more comprehensive taxation of individual income. The tax treatment of corporate income derived from intangibles (patents, trademarks, etc.) exemplifies the challenges facing policymakers at all levels of government -- from US states to OECD countries. Who are the ultimate recipients of this income, and, from the viewpoint of efficiency and equity, which jurisdiction(s) should have the power to tax this income? Given the fluidity of business organizational structures and ownership in internationally-integrated markets, what policy options are feasible? These and similar issues can conceivably be resolved through explicit policy coordation, through the development of new, higher-level institutions, or both -- but this promises to be a time-consuming, evolutionary process.

David E. Wildasin / dew@davidwildasin.us