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Corporate tax harmonization in the EU

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  • Leon Bettendorf

    ()

  • Albert van der Horst

    ()

  • Ruud de Mooij
  • M.P. Devereux
  • S. Loretz

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 CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 133.

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Date of creation: Nov 2009
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Handle: RePEc:cpb:discus:133

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Cited by:
  1. 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.
  2. Keuschnigg, Christian & Loretz, Simon & Winner, Hannes, 2014. "Tax Competition and Tax Coordination in the European Union: A Survey," Working Papers in Economics and Finance, University of Salzburg 2014-4, University of Salzburg.
  3. Kimberly Clausing, 2007. "Corporate tax revenues in OECD countries," International Tax and Public Finance, Springer, Springer, vol. 14(2), pages 115-133, April.
  4. Martini, Jan-Thomas & Niemann, Rainer & Simons, Dirk, 2014. "Management incentives under formula apportionment: Tax-induced distortions of effort and compensation in a principal-agent setting," arqus Discussion Papers in Quantitative Tax Research 168, arqus - Arbeitskreis Quantitative Steuerlehre.
  5. Michael P. Devereux & Simon Loretz, 2011. "How Would EU Corporate Tax Reform Affect US Investment in Europe?," NBER Working Papers 17576, National Bureau of Economic Research, Inc.
  6. Lenka Janíčková, 2012. "Tax Harmonization – the Possible Way out of the Crisis?," Český finanční a účetní časopis, University of Economics, Prague, University of Economics, Prague, vol. 2012(1), pages 64-81.
  7. George Zodrow, 2006. "Capital Mobility and Source-Based Taxation of Capital Income in Small Open Economies," International Tax and Public Finance, Springer, Springer, vol. 13(2), pages 269-294, May.
  8. Haufler, Andreas & Lülfesmann, Christoph, 2013. "Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation," Discussion Papers in Economics, University of Munich, Department of Economics 14358, University of Munich, Department of Economics.
  9. Jan Thomas Martini & Rainer Niemann & Dirk Simons, 2014. "Management Incentives under Formula Apportionment - Tax-Induced Distortions of Effort and Compensation in a Principal-Agent Setting -," CESifo Working Paper Series 4908, CESifo Group Munich.
  10. 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.

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