Practical Aspects of Implementing Formulary Apportionment in the European Union

Abstract

The author presented this paper at the 2007 International Tax Symposium held at theUniversity of Florida Levin College of Law Graduate Tax Program.The European Commission is fast approaching its self-imposed deadline to present a legislative measure introducing a consolidated common corporate tax base and formulary apportionment within the European Union in 2008. This deadline represents the culmination of work that began when the Commission released a study in 2001 advocating that the European Union adopt a new method of taxing EU multinational companies that would eliminate the tax obstacles to cross-border investment that undermine the internationalcompetitiveness of EU multinationals.The Commission has concluded that the European Union would not be able to function as a true internal market as long as its multinational enterprises had to contend with up to 27 different sets of company tax rules - one set of rules for each of the 27 Member States. EU business groups generally support the Commission's efforts, noting that a common EU level company tax system would reduce the complexity and uncertainty surrounding corporate taxation in the EU. For example, the trade group Business Europe (formerly UNICE) has indicated that a common consolidated EU corporate tax base is the only way to eliminate the tax obstacles to cross-border business integration in the European Union. EU multinationals could become more competitive and expend fewer resources in complying with Member States tax rules if they could use one set of tax rules to calculate their EU-wide profits.