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How Would EU Corporate Tax Reform Affect US Investment in Europe?

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  • Michael P. Devereux
  • Simon Loretz

Abstract

This paper examines the likely impact of a proposed formula apportionment system for corporation tax in the EU on the inbound investment of US multinational companies. We pay attention to tax planning strategies that may be employed by US multinationals and investigate whether effective tax rates in Europe of US companies differ from those of European companies. The proposal is for an optional system: we estimate the extent to which both European and US companies would be likely to choose it taking into account their existing structures and future investment incentives. The relative position of US and European companies depends crucially on the taxation of foreign passive income.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17576.

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Date of creation: Nov 2011
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Publication status: published as How Would EU Corporate Tax Reform Affect US Investment in Europe? , Michael P. Devereux, Simon Loretz. in Tax Policy and the Economy, Volume 26 , Brown. 2012
Handle: RePEc:nbr:nberwo:17576

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  1. Leon Bettendorf & Albert van der Horst & Ruud de Mooij & M.P. Devereux & S. Loretz, 2009. "Corporate tax harmonization in the EU," CPB Discussion Paper 133, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Michael P. Devereux & Simon Loretz, 2010. "Evaluating Neutrality Properties of Corporate Tax Reforms," Working Papers, Oxford University Centre for Business Taxation 1007, Oxford University Centre for Business Taxation.
  3. Zimmerman, Jerold L., 1983. "Taxes and firm size," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 5(1), pages 119-149, April.
  4. Ruud A. de Mooij & Sjef Ederveen, 2008. "Corporate Tax Elasticities A Reader’s Guide to Empirical Findings," Working Papers, Oxford University Centre for Business Taxation 0822, Oxford University Centre for Business Taxation.
  5. Peter Egger & Simon Loretz & Michael Pfaffermayr & Hannes Winner, 2008. "Firm-specific Forward-looking Effective Tax Rates," Working Papers, Oxford University Centre for Business Taxation 0811, Oxford University Centre for Business Taxation.
  6. Clemens Fuest & Thomas Hemmelgarn & Fred Ramb, 2007. "How would the introduction of an EU-wide formula apportionment affect the distribution and size of the corporate tax base? An analysis based on German multinationals," International Tax and Public Finance, Springer, Springer, vol. 14(5), pages 605-626, October.
  7. Gordon, Roger H & Wilson, John Douglas, 1986. "An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment," Econometrica, Econometric Society, Econometric Society, vol. 54(6), pages 1357-73, November.
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Cited by:
  1. Devereux, Michael P., 2012. "Issues In The Design Of Taxes On Corporate Profit," National Tax Journal, National Tax Association, vol. 65(3), pages 709-30, September.
  2. 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.

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