Changing the taxation of Multijurisdictional Firms, who gains, who loses ?

A Multijurisdictional Firm operates on the territory of at least two jurisdictions, either national entities like the Member States of the European Union, or sub-national entities like States, Provinces, Regions, Lander or Cantons. Related to that, the European Union is currently discussing the replacement of the present system of taxation of multinational companies, based on a set of bi-lateral treaties along the lines of an OECD model designed to regulate tax relations between fully sovereign jurisdictions, with a system based on consolidation and apportionment typical of federations. The paper investigates the effect of such change on the behavior of multijurisdictional firms which conduct different tax shifting strategies, and on the tax revenue of jurisdictions. Firms strategy contingent optimal apportionment formulae are derived and some other tax and political economy issues are examined, some related to the decision process among jurisdictions