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CFC legislation, passive assets and the impact of the ECJ’s Cadbury-Schweppes decision

Author

Listed:
  • Martin Ruf

    () (Eberhard Karls Universität Tübingen)

  • Alfons J. Weichenrieder

    () (Goethe Universität Frankfurt)

Abstract

In its Cadbury-Schweppes decision of 12 September 2006 (C-196/04), the ECJ decided that the UK CFC rules, which were implemented to subject low taxed passive income of foreign affiliates to UK corporate tax, implied an infringement of the freedom of establishment. Consequently, many EU countries including Germany changed their legislation. The paper discusses to which extent the ECJ ruling has impacted on the allocation of passive assets in German multinationals. Using firm level data we find evidence for an increased preference for low-tax European countries compared to non-European countries.

Suggested Citation

  • Martin Ruf & Alfons J. Weichenrieder, 2013. "CFC legislation, passive assets and the impact of the ECJ’s Cadbury-Schweppes decision," Working Papers 1315, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:1315
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    File URL: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_13/WP1315.pdf
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    Cited by:

    1. Michael Overesch & Sabine Schenkelberg & Georg Wamser, 2018. "Do US Firms Pay Less Tax than their European Peers? On Firm Characteristics, Profit Shifting Opportunities, and Tax Legislation as Determinants of Tax Differentials," CESifo Working Paper Series 6960, CESifo Group Munich.

    More about this item

    Keywords

    European Court of Justice; corporation tax; foreign direct investment; CFC regulation; passive investment;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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