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The Effects of EU Formula Apportionment on Corporate Tax Revenues

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  • Michael P. Devereux
  • Simon Loretz

Abstract

The European Commission proposes to replace the current system of taxing corporate income using separate accounting by a two-step 'consolidation and apportionment' procedure. This paper uses a large set of unconsolidated firm-level data to assess the likely impact on corporate tax revenues in each member state. Taking pre-tax profit as given, overall tax revenues would be likely to drop by 2.5 per cent if companies could choose whether to participate. By contrast, if they were forced to participate, total tax revenues would be likely to increase by more than 2 per cent, leaving some European countries - most notably, Spain, Sweden and the UK - better off. We investigate how sensitive these results are to the apportionment factors used. Copyright (c) 2008 The Authors.

Suggested Citation

  • Michael P. Devereux & Simon Loretz, 2008. "The Effects of EU Formula Apportionment on Corporate Tax Revenues," Fiscal Studies, Institute for Fiscal Studies, vol. 29(1), pages 1-33, March.
    • Handle: RePEc:ifs:fistud:v:29:y:2008:i:1:p:1-33
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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