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Company Tax Reform in the European Union

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Author Info
Peter Birch Sørensen (Economic Policy Research Unit, Institute of Economics, University of Copenhagen)
Abstract

The European Commission recently proposed to move towards a consolidated tax base for European multinational companies, to be allocated across EU member states through a system of formula apportionment. This paper argues that while the Commission’s four alternative blueprints for company tax reform may reduce existing problems of transfer pricing, they will also create new distortions as long as existing tax rate differentials are maintained. The paper also analyzes the changes in international tax spillovers which will occur as a result of a switch from the current system of separate accounting to formula apportionment. The final part of the paper discusses whether more conventional corporate tax harmonization should still be a long term policy goal for the EU and presents quantitative estimates of the effciency gains from harmonization.

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Publisher Info
Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 03-08.

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Length: 43 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:kud:epruwp:03-08

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Related research
Keywords: corporate tax reform in the EU; formula apportionment; tax harmonization;

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Find related papers by JEL classification:
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Peter Birch Sorensen, 2001. "International Tax Coordination: Regionalism Versus Globalism," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January. [Downloadable!] (restricted)
    Other versions:
  3. Wolfgang Eggert & Guttorm Schjelderup, 2003. "Symmetric Tax Competition under Formula Apportionment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 439-446, 04. [Downloadable!] (restricted)
  4. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, . "Tax Spillovers under Separate Accounting and Formula Apportionment," EPRU Working Paper Series 01-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  5. Weiner, Joann, 2002. "Formula Apportionment in the European Union: A Dream Come True or the EU's Worst Nightmare?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Guttorm Schjelderup & Lars Sorgard, 1997. "Transfer Pricing as a Strategic Device for Decentralized Multinationals," International Tax and Public Finance, Springer, vol. 4(3), pages 277-290, July. [Downloadable!] (restricted)
  7. S¯ren Bo Nielsen & Pascalis Raimondos-M¯ller & Guttorm Schjelderup, 2003. "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 419-437, 04. [Downloadable!] (restricted)
    Other versions:
  8. Peter Birch Sørensen, . "International Tax Coordination: Regionalism versus Globalism," EPRU Working Paper Series 01-08, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
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