Aggressive tax planning efforts of highly profitable multinational companies (Base Erosion and Profit Shifting (BEPS)) have become the subject of intense public debate in recent years. As a response, several international initiatives and parties have called for more transparency in financial reporting, especially by means of a Country-by-Country Reporting (CbCR). In line with that, the OECD and the European Commission have recently presented proposals for a comprehensive disclosure of country-specific tax-related information for companies in all industry sectors. In our paper, we demonstrate that neither consolidated or individual financial statements nor other existing data sources seem to be an appropriate basis for providing such country-specific information. Instead, it would be necessary to define detailed and harmonized definitions and regulations to ensure comparability. The discussion on benefits and costs of a CbCR reveals that benefits (at least partially) lack a theoretical foundation and, overall, do not seem to outweigh associated costs. This holds true, in particular, since current tax planning activities are mainly based on the legal exploitation of gaps and loopholes in national and international tax law. Instead, we argue that tax legislators should limit profit shifting by enforcing tax rules and by closing gaps in tax law. In particular, we call for more tightened and standardized transfer pricing regulations and thin-cap rules to be adopted at an international level.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. 1 The Use of SME Tax Incentives in the European UnionSören Martin Bergner*, Rainer Bräutigam**, Maria Theresia Evers**, Christoph Spengel*** January 2017This paper discusses the impact and the appropriateness of tax incentives for small and medium-sized enterprises (SMEs) in the European Union. First, we provide a survey of implemented tax incentives specifically targeted at SMEs in the 28 EU Member States. Building hereon, we measure the impact of these regimes on the effective tax burdens of targeted companies. We find that SME tax incentives are a commonly used measure among European policy makers. The vast majority of regimes, however, only marginally reduce the tax liability of SMEs. If major reliefs are available, they mostly stem from special tax rates whereas tax credits and special allowance play a minor role. In the second main part of the analysis, we examine the arguments potentially justifying the usage of SME tax incentives. As a main result, small firms per se do not create more jobs and innovations nor do they face insurmountable financing constraints. The existence of market failures commonly associated with SMEs -and possibly warranting the use of SME tax incentives -can therefore not be confirmed. Instead, disproportionate tax compliance costs for small entities constitute the most compelling argument for a special tax treatment. These compliance costs can most appropriately be addressed by administrative reliefs. Special tax rates, tax credits and allowances, in contrast, are not only inefficient but also ineffective in this regard. Instead of improving the neutrality of the overall tax system, the latter are likely to add further distortions and unnecessary complexity. Altogether, the focus of policy-makers should thus shift from providing discriminatory incentives to the design of a generally neutral and simple tax system, which would benefit small as well as large enterprises. JEL Classification Code: H24, H25Keywords: SME, Tax Policy, European Union *: University of Mannheim **: ZEW and University of Mannheim ***: University of Mannheim and ZEW Corresponding Author: Sören Martin Bergner, bergner@uni-mannheim.de 2 IntroductionRecently, public discussions on tax policy have mainly centered around profit shifting activities by large, multinational firms. 1 The majority of businesses, however, is made up of small and medium-sized enterprises (SMEs). In the European Union, they account for 99.8% of all businesses and 67% of total employment. ...

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Evidence on Book-tax Differences and Disclosure Quality Based on the Notes to the Financial StatementsMaria Theresia Evers*, Katharina Finke*, Sebastian Matenaer**, Ina Meier**, Benedikt Zinn* July 2014Abstract: The German Accounting Law Modernization Act (BilMoG) represents a change in paradigm with regard to the traditionally close relationship between financial and tax accounting in Germany. At the same time, requirements on the disclosure of deferred taxes were revised considerably. We make use of these new disclosure provisions to disaggregate firms' deferred tax position and to analyze the components of temporary book-tax differences that add to the reporting gap in Germany. To this end, we apply a unique dataset of hand-collected information from individual financial statements for the fiscal year 2010. We find considerable differences between financial and tax accounting and observe that temporary book-tax differences are mainly associated with mandatory differences in accounting for provisions. The scope and quality of tax-related disclosures vary substantially and the overall disclosure quality is low. In order to identify the determinants of the heterogeneity of disclosure quality, we construct an index for voluntary and mandatory disclosure of deferred tax information and conduct multivariate analyses to explain firms' disclosure decisions. We show that the recognition of deferred tax assets and liabilities on the face of the balance-sheet is significantly and positively related with disclosure quality in the notes to the financial statements. Further, our results suggest that larger firms are more likely to have highquality tax disclosures and that high implementation costs could also explain the observed shortfalls in disclosure quality. Moreover, we find that different reporting incentives might apply if reporting on losses is assessed in isolation. We use these insights to derive implications for the discussion about whether and how to reform disclosure requirements under German GAAP. JEL Classification: H20, H25, K34, M41Keywords: book-tax conformity; book-tax differences; deferred taxes; disclosure quality; tax reporting

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. http://ftp.zew.de/pub/zew-docs/dp/dp17003.pdf Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar. Terms of use: Documents inDis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. The Implications of Book-Tax Differences: A Meta-AnalysisMaria Theresia Evers*, Ina Meier**, Katharina Nicolay*** November 2016 AbstractOver the last decade, a large body of tax accounting literature on the association between book-tax conformity (BTC)/book-tax differences (BTD) and firms' opportunistic reporting behavior has emerged. Yet, existing empirical evidence on the questions whether increased book-tax conformity actually reduces Earnings Management (EM) and/or Tax Sheltering (TS) and whether book-tax differences are really indicative of such opportunistic reporting behavior is not yet clear. We therefore conduct a meta-analysis aimed at identifying the sources of heterogeneity in primary studies and at providing a consensus estimate with respect to the sign and the statistical significance level for the examined association. Our qualitative literature review reveals that major sources of heterogeneity in the study design include differences in the proxies for EM and TS and in the measures used to determine BTD and BTC. Our meta-regression results show that BTD are indeed indicative of opportunistic reporting behavior, and even more so of EM. These results are, however, weaker for studies that determine BTD only roughly as the difference between book and estimated taxable income instead of using more specific BTD proxies. Moreover, examining actual BTD computed from tax returns instead of only approximating these from financial statements strongly increases the effects. Hence, efforts taken to accurately determine BTD seem to be worth wile when it comes to the explanatory power for opportunistic reporting. Furthermore, our results suggest a negative association between book-tax conformity and EM/TS, which we interpret as an indicator for higher conformity indeed being effective in reducing aggressive reporting.JEL Classificat...

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

Aggressive tax planning efforts of highly profitable multinational companies (Base Erosion and Profit Shifting (BEPS)) have recently become the subject of intense public debate. As a response, several international initiatives and parties have called for more transparency in financial reporting, especially by means of a country-specific reporting of certain tax information (Country-by-Country Reporting (CbCR)). In our paper, we demonstrate that neither consolidated nor individual financial accounts seem to be an appropriate platform to provide such country-specific information and, therefore, that CbCR cannot be based on extended financial accounting standards. Moreover, we argue that even separate CbCR templates do not prevent multinationals from profit shifting, since their common tax minimization strategies are mainly based on the legal exploitation of gaps and loopholes in national and international tax law. In that regard, we show that expected costs for CbCR would exceed expected benefits and therefore contend that CbCR cannot be regarded as a convincing measure to combat international profit shifting. Instead, we argue that tax legislators should limit profit shifting by enforcing national and international tax rules and by closing gaps in tax law. In particular, we call for more tightened and standardized transfer pricing regulations to be adopted at an international level.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Book-Tax Conformity and Reporting Behavior-A Quasi-experimentMaria Theresia Evers*, Ina Meier**, Katharina Nicolay*** January 2016Abstract: We examine how a comprehensive change in book-tax conformity affects firms' reporting behavior. To this end, we exploit a Reform Act as a quasi-natural experiment which implied a decrease in book-tax conformity in Germany in 2010. In particular, this reform allows firms to exercise tax accounting options independently from financial accounting. Our study builds on a unique dataset of linked individual financial statements and actual tax return data. It covers roughly 150 incorporated firms for the years 2008 to 2012. Exploiting the exceptional change in conformity, we contribute to the ongoing debate on the impact of booktax conformity. Our results show that profitable companies, which have a clear tax sheltering incentive, actually use the newly introduced reporting leeway to manage taxable income downwards. This is especially attributable to companies exploiting favorable tax depreciation rules. Moreover, we find larger opportunistic tax reporting responses for small companies with less complex and predominantly domestic group structures. In addition, we observe that a decrease in book-tax conformity induces a decrease in the general persistence of taxable income, but at the same time gives rise to higher financial earnings persistence. This corroborates our finding of increased tax sheltering activity in post reform years.JEL Classification: H20, H25, K34, M41

Am 16. März 2011 hat die Europäische Kommission einen Richtlinienentwurf (RLE) für eine "Gemeinsame Konsolidierte Körperschaftsteuer-Bemessungsgrundlage (GKKB)" vorgelegt. Die darin enthaltenen Normen zur harmonisierten Ermittlung der steuerlichen Bemessungsgrundlage weisen jedoch aufgrund der häufigen Verwendung unbestimmter Rechtsbegriffe noch zahlreiche Regelungslücken und offene Auslegungsfragen auf, die sich nicht problemlos durch den Verweis auf nationales Zivilrecht beheben lassen. Vor diesem Hintergrund besteht die zentrale Zielsetzung des Beitrags darin, mit einer modifizierten Einnahmeüberschussrechnung, welche die Periodisierung im Rahmen der steuerlichen Gewinnermittlung stärker als bisher an Zahlungsvorgänge knüpft, einen Vorschlag für eine Gemeinsame Körperschaftsteuer-Bemessungsgrundlage (GKB) innerhalb der EU zu konkretisieren. Der Übergang hin zu einer stärker zahlungsorientierten Gewinnermittlung würde mehr Klarheit und Vereinheitlichung mit sich bringen. Eine quantitative Analyse der effektiven Steuerbelastung von Kapitalgesellschaften in allen 28 EU-Mitgliedstaaten zeigt zudem, dass die Gewinnermittlung sowohl nach GKKB-RLE als auch bei Zugrundelegung einzelner Regelungen einer modifizierten Einnahmeüberschussrechnung nur geringe materielle Belastungskonsequenzen nach sich zieht, sodass von einer hohen politökonomischen Umsetzbarkeit des Reformvorschlags auszugehen ist. Darüber hinaus verspricht eine GKB weitere, wichtige Vorteile bei der Besteuerung grenzüberschreitender Sachverhalte, etwa bei der grenzüberschreitenden Verlustverrechnung.