Abstract
In this paper we use firm level data from a listed multinational to investigate how several designs for the Common Consolidated Corporate Tax Base (CCCTB) formula could affect the allocation of the consolidated tax base. The design is relevant in the light of member states’ concern for protecting their tax revenues, as well as for the multinational companies’ tax minimizing possibilities. Moreover, it plays an important role in achieving an efficient and simple tax system. Simulating different apportionment formulas, the results show that including more factors and using more equal weights distributes the common tax base more equally, which could reduce the incentive to shift factors from high to low tax countries. The results also indicate that simplifying the factor definitions, leads to rather minor changes in the allocation. Using unpublished data, this study allows to investigate the consequences of different formulas in detail, which contributes to the current discussion on corporate tax harmonization in the EU.
Highlights
In 2004, the European Union (EU) welcomed ten countries of Central and Eastern Europe
This study uses firm level data from a listed multinational in order to assess how several designs of the Common Consolidated Corporate Tax Base (CCCTB) formula could affect the allocation of the consolidated tax base
We investigate to what extent the allocation effects differ when including one or more factor(s) into the formula or putting high or low weights on the formula factors
Summary
In 2004, the European Union (EU) welcomed ten countries of Central and Eastern Europe. Bulgaria and Romania joined the EU in 2007, which brought the total number of member states (MS) to twenty-seven. Notwithstanding this big achievement, the enlargement of the EU makes some policy problems even more pressing. One such problem relates to the several tax obstacles that are currently harming the international competitiveness of multinationals. A. Roggeman et al The EU apportionment formula: insights from a business case costs because of the different tax systems across the twenty-seven MS. Other tax obstacles concern the limitation on cross-border loss relief and the problems with transfer pricing for intra group transactions (EC 2001a)
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