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Corporate tax harmonization in the EU

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  • Leon Bettendorf

    ()
    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Michael P. Devereux

    ()
    (Oxford University Centre for Business Taxation)

  • Albert van der Horst

    ()
    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Simon Loretz

    ()
    (Oxford University Centre for Business Taxation)

  • Ruud A. de Mooij

    ()
    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This paper explores the economic consequences of proposed EU reforms for a common consolidated corporate tax base. The reforms replace separate accounting with formula apportionment as a way to allocate corporate tax bases across countries. To assess the economic implications, we use a numerical CGE model for Europe. It encompasses several decision margins of firms such as marginal investment, FDI decisions, and multinational profit shifting. The simulations suggest that consolidation does not yield substantial welfare gains for Europe. The variation of effects across countries is large and depends on the choice of the apportionment formula. Consolidation with formula apportionment does not weaken incentives for tax competition. Tax competition instead offers a rationale for rate harmonisation, in addition to base harmonisation.

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Bibliographic Info

Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0932.

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Date of creation: 2009
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Handle: RePEc:btx:wpaper:0932

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Keywords: Corporate taxation; tax harmonization; European Union; CCCTB;

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Cited by:
  1. Haufler, Andreas & Lülfesmann, Christoph, 2012. "Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62082, Verein für Socialpolitik / German Economic Association.
  2. Ortmann, Regina & Sureth, Caren, 2014. "Can the CCCTB alleviate tax discrimination against loss-making European multinational groups?," arqus Discussion Papers in Quantitative Tax Research 165, arqus - Arbeitskreis Quantitative Steuerlehre.
  3. Michael P. Devereux & Simon Loretz, 2012. "How Would EU Corporate Tax Reform Affect US Investment in Europe?," NBER Chapters, in: Tax Policy and the Economy, Volume 26, pages 59-91 National Bureau of Economic Research, Inc.
  4. George Zodrow, 2006. "Capital Mobility and Source-Based Taxation of Capital Income in Small Open Economies," International Tax and Public Finance, Springer, vol. 13(2), pages 269-294, May.
  5. Bernardi, Luigi, 2009. "Le tasse in Europa dagli anni novanta
    [Taxation in Europe since the Years 1990s]
    ," MPRA Paper 23441, University Library of Munich, Germany.
  6. Lenka Janíčková, 2012. "Tax Harmonization – the Possible Way out of the Crisis?," Český finanční a účetní časopis, University of Economics, Prague, vol. 2012(1), pages 64-81.
  7. Kimberly Clausing, 2007. "Corporate tax revenues in OECD countries," International Tax and Public Finance, Springer, vol. 14(2), pages 115-133, April.

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