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The EU apportionment formula: insights from a business case

Author

Listed:
  • Annelies Roggeman
  • Isabelle Verleyen
  • Philippe Van Cauwenberge
  • Carine Coppens

Abstract

In this paper we use firm level data from a listed multinational to investigate how several designs for the Common Consolidated Corporate Tax Base (CCCTB) formula could affect the allocation of the consolidated tax base. The design is relevant in the light of member states’ concern for protecting their tax revenues, as well as for the multinational companies’ tax minimizing possibilities. Moreover, it plays an important role in achieving an efficient and simple tax system. Simulating different apportionment formulas, the results show that including more factors and using more equal weights distributes the common tax base more equally, which could reduce the incentive to shift factors from high to low tax countries. The results also indicate that simplifying the factor definitions, leads to rather minor changes in the allocation. Using unpublished data, this study allows to investigate the consequences of different formulas in detail, which contributes to the current discussion on corporate tax harmonization in the EU.

Suggested Citation

  • Annelies Roggeman & Isabelle Verleyen & Philippe Van Cauwenberge & Carine Coppens, 2013. "The EU apportionment formula: insights from a business case," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(2), pages 235-251, April.
    • Handle: RePEc:taf:jbemgt:v:14:y:2013:i:2:p:235-251
    DOI: 10.3846/16111699.2011.638668
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    References listed on IDEAS

    as
    1. Johanna Hey, 2008. "EU Common Consolidated Corporate Tax Base: Guided Variety versus Strict Uniformity - Lessons from the U. S. States’ Tax Chaos," Jean Monnet Working Papers 2, Jean Monnet Chair.
    2. Joann Martens Weiner, 2005. "Formulary Apportionment and Group Taxation in the European Union: Insights from the United States and Canada," Taxation Papers 8, Directorate General Taxation and Customs Union, European Commission, revised Mar 2005.
    3. Christoph Spengel & Carsten Wendt, 2007. "A Common Consolidated Corporate Tax Base for Multinational Companies in the European Union, Some Issues und Options," Working Papers 0717, Oxford University Centre for Business Taxation.
    4. Ana Agundez-Garcia, 2006. "The Delineation and Apportionment of an EU Consolidated Tax Base for Multi-jurisdictional Corporate Income Taxation: a Review of Issues and Options," Taxation Papers 9, Directorate General Taxation and Customs Union, European Commission, revised Oct 2006.
    5. European Commission, 2009. "Taxes in Europe Database," Taxes in Europe Database 0001, Directorate General Taxation and Customs Union, European Commission, revised Jun 2020.
    6. European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies 0005, Directorate General Taxation and Customs Union, European Commission.
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    Citations

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    Cited by:

    1. Markéta Mlčúchová, 2024. "Novel Configuration of Formulary Apportionment Using the Correlated Random Effect Approach," Politická ekonomie, Prague University of Economics and Business, vol. 2024(1), pages 73-101.
    2. repec:prg:jnlpol:v:preprint:id:1411 is not listed on IDEAS
    3. Dirk Kiesewetter & Tobias Steigenberger & Matthias Stier, 2018. "Can formula apportionment really prevent multinational enterprises from profit shifting? The role of asset valuation, intragroup debt, and leases," Journal of Business Economics, Springer, vol. 88(9), pages 1029-1060, December.
    4. Mlčúchová Markéta, 2023. "Formulary apportionment in the European Union—future research agenda," Economics and Business Review, Sciendo, vol. 9(3), pages 124-152, October.

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