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Corporate Tax Consolidation and Enhanced Cooperation in the European Union

  • Leon Bettendorf
  • Albert Van Der Horst
  • Ruud A. De Mooij
  • Hendrik Vrijburg

This article assesses the economic implications of the introduction of consolidation with formula apportionment in the European Union under alternative enhanced cooperation agreements. We fi?nd that the consolidation is likely to yield a small aggregate welfare gain in Europe, but that not all countries benefi?t. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection which distroys the possibility of cooperation. We fi?nd that a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a European-wide reform.

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File URL: http://hdl.handle.net/10.1111/j.1475-5890.2010.00121.x
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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 31 (2010)
Issue (Month): 4 (December)
Pages: 453-479

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Handle: RePEc:ifs:fistud:v:31:y:2010:i::p:453-479
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