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Corporate tax consolidation and enhanced cooperation in the European Union

  • Leon Bettendorf


  • Albert van der Horst


  • Ruud 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 find that the consolidation is likely to yield a small aggregate welfare gain in Europe, but that not all countries benefit. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection that reduces the number of participating countries. We find 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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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 132.

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Date of creation: Nov 2009
Date of revision:
Handle: RePEc:cpb:discus:132
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  1. Johannes Becker & Clemens Fuest, 2010. "Tax enforcement and tax havens under formula apportionment," International Tax and Public Finance, Springer, vol. 17(3), pages 217-235, June.
  2. Massimo Bordignon & Sandro Brusco, 2003. "On Enhanced Cooperation," CESifo Working Paper Series 996, CESifo Group Munich.
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  7. Leon Bettendorf & Albert van der Horst & Ruud A. de Mooij, 2009. "Corporate Tax Policy and Unemployment in Europe: An Applied General Equilibrium Analysis," The World Economy, Wiley Blackwell, vol. 32(9), pages 1319-1347, 09.
  8. Paul Beaudry & Pierre Cahuc & Hubert Kempf, 1999. "Is it Harmful to Allow partial Cooperation ?," Working Papers 99-39, Centre de Recherche en Economie et Statistique.
  9. Konrad, K.A. & Schjelderup, G., 1998. "Fortress Building in Global Tax Competition," Papers 17/98, Norwegian School of Economics and Business Administration-.
  10. Albert van der Horst & Leon Bettendorf & Hugo Rojas-Romagosa, 2007. "Will corporate tax consolidation improve efficiency in the EU?," CPB Document 141, CPB Netherlands Bureau for Economic Policy Analysis.
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  12. Sorensen, Peter Birch, 2004. "International tax coordination: regionalism versus globalism," Journal of Public Economics, Elsevier, vol. 88(6), pages 1187-1214, June.
  13. Clemens Fuest & Thomas Hemmelgarn & Fred Ramb, 2007. "How would the introduction of an EU-wide formula apportionment affect the distribution and size of the corporate tax base? An analysis based on German multinationals," International Tax and Public Finance, Springer, vol. 14(5), pages 605-626, October.
  14. Andreas Haufler & Ian Wooton, 2001. "Regional Tax Coordination and Foreign Direct Investment," CESifo Working Paper Series 628, CESifo Group Munich.
  15. Ruud de Mooij & Michael P. Devereux, 2009. "Alternative Systems of Business Tax in Europe: An applied analysis of ACE and CBIT Reforms," Taxation Studies 0028, Directorate General Taxation and Customs Union, European Commission.
  16. Riedel, Nadine & Runkel, Marco, 2007. "Company tax reform with a water's edge," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1533-1554, August.
  17. Klassen, Kenneth J. & Shackelford, Douglas A., 1998. "State and provincial corporate tax planning: income shifting and sales apportionment factor management," Journal of Accounting and Economics, Elsevier, vol. 25(3), pages 385-406, June.
  18. Austan Goolsbee & Edward L Maydew, 1998. "Coveting Thy Neighbor's Manuafacturing: The Dilemma of State Income Apportionment," NBER Working Papers 6614, National Bureau of Economic Research, Inc.
  19. Hassett, Kevin A. & Hubbard, R. Glenn, 2002. "Tax policy and business investment," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 20, pages 1293-1343 Elsevier.
  20. Leon Bettendorf & Joeri Gorter & Albert van der Horst, 2006. "Who benefits from tax competition in the European Union?," CPB Document 125, CPB Netherlands Bureau for Economic Policy Analysis.
  21. John B. Burbidge & James A. DePater & Gordon M. Myers & Abhijit Sengupta, 1996. "A Coalition-formation Approach to Equilibrium Federations and Trading Block s," Department of Economics Working Papers 1996-05, McMaster University.
  22. Marcel Gérard, 2006. "Reforming the Taxation of Multijurisdictional Enterprises in Europe, a Tentative Appraisal," CESifo Working Paper Series 1795, CESifo Group Munich.
  23. Jens Brøchner & Jesper Jensen & Patrik Svensson & Peter Birch Sørensen, 2006. "The Dilemmas of Tax Coordination in the Enlarged European Union," CESifo Working Paper Series 1859, CESifo Group Munich.
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