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Company Tax Reform in the European Union

  • Peter Sørensen


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    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 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 investigates 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 efficiency gains from harmonization. Copyright Kluwer Academic Publishers 2004

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    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 11 (2004)
    Issue (Month): 1 (January)
    Pages: 91-115

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    Handle: RePEc:kap:itaxpf:v:11:y:2004:i:1:p:91-115
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    1. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, . "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," EPRU Working Paper Series 01-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    2. 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.
    3. Richard E. Baldwin & Paul Krugman, 2002. "Agglomeration, Integration and Tax Harmonization," NBER Working Papers 9290, National Bureau of Economic Research, Inc.
    4. Peter Birch Sørensen, 2001. "International Tax Coordination: Regionalism Versus Globalism," CESifo Working Paper Series 483, CESifo Group Munich.
    5. 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.
    6. Gordon, Roger H & Wilson, John Douglas, 1986. "An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment," Econometrica, Econometric Society, vol. 54(6), pages 1357-73, November.
    7. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    8. 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.
    9. Michael Devereux, 2004. "Debating Proposed Reforms of the Taxation of Corporate Income in the European Union," International Tax and Public Finance, Springer, vol. 11(1), pages 71-89, January.
    10. Mintz, Jack & Weiner, Joann Martens, 2003. "Exploring Formula Allocation for the European Union," International Tax and Public Finance, Springer, vol. 10(6), pages 695-711, November.
    11. Joann Weiner, 2002. "Formula Apportionment in the European Union: A Dream Come True or the EU’s Worst Nightmare?," CESifo Working Paper Series 667, CESifo Group Munich.
    12. Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer, vol. 10(6), pages 651-71, November.
    13. Marcel Gérard & Joann Weiner, 2003. "Cross-Border Loss Offset and Formulary Apportionment: How do they affect multijurisdictional firm investment spending and interjurisdictional tax competition ?," CESifo Working Paper Series 1004, CESifo Group Munich.
    14. European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies 0005, Directorate General Taxation and Customs Union, European Commission.
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