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Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria

Author

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  • Rainer Niemann
  • Corinna Treisch

Abstract

In 2005, Austria modified its group taxation regime and now provides an option for cross-border loss-offset. We analyse the combined impact of Austria's new group taxation and loss-offset limitations on cross-border investment decisions of domestic corporations. Monte Carlo simulations in an inter-temporal setting reveal that the impact on foreign real investment induced by the new group taxation is ambiguous. Whereas marginal investment projects with decreasing cash flows tend to benefit from group taxation, innovative projects with initial losses and increasing cash flows may be discriminated against. Investors should consider domestic income and repatriation policy simultaneously before opting for group taxation.

Suggested Citation

  • Rainer Niemann & Corinna Treisch, 2005. "Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria," CESifo Working Paper Series 1506, CESifo.
    • Handle: RePEc:ces:ceswps:_1506
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    References listed on IDEAS

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    Cited by:

    1. Haufler, Andreas & Mardan, Mohammed, 2014. "Cross-border loss offset can fuel tax competition," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 42-61.
    2. Kalamov, Zarko Y. & Runkel, Marco, 2016. "On the implications of introducing cross-border loss-offset in the European Union," Journal of Public Economics, Elsevier, vol. 144(C), pages 78-89.
    3. Sabrina Dorn, 2009. "Monte-Carlo Simulations Revised: A Reply to Arqus," ifo Working Paper Series 73, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Deborah Knirsch & Rainer Niemann, 2008. "Deferred Shareholder Taxation -- Implementing a Neutral Business Tax in the European Union," Accounting in Europe, Taylor & Francis Journals, vol. 5(2), pages 101-125, December.
    5. 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.
    6. Lina Cui, 2013. "A Markov Chain Analysis on the Impact of German Tax Loss Offset Restrictions," Economic Papers, The Economic Society of Australia, vol. 32(1), pages 122-134, March.
    7. Knirsch, Deborah & Niemann, Rainer, 2007. "Allowance for shareholder equity: implementing a neutral corporate income tax in the European Union," arqus Discussion Papers in Quantitative Tax Research 34, arqus - Arbeitskreis Quantitative Steuerlehre.

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    More about this item

    Keywords

    group taxation; investment decisions; Monte Carlo simulations; international taxation; loss-offset rules;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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