An applied analysis of ACE and CBIT reforms in the EU

Mooij, Ruud de; Devereux, Michael

doi:10.1007/s10797-010-9138-8

Cited by 76 publications

(41 citation statements)

References 19 publications

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“…If the reform were revenue neutral, nominal CT rates could be reduced, while average tax rates could perhaps be allowed to fall due to overall efficiency gains. In an important contribution to the tax literature, De Mooij and Devereux (2011) conclude that their applied general equilibrium model for the EU suggests that "if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries." 46…”

Section: Comprehensive Business Income Tax (Cbit)mentioning

confidence: 99%

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Cnossen

2017

Int Tax Public Finance

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This paper surveys and evaluates the corporation tax systems of the Member States of the European Union on the basis of a comprehensive taxonomy of actual and potential regimes, which have as their base either profits; profits, interest and royalties; or economic rents. The current regimes give rise to various instate and interstate spillovers, which violate the basic tenets-neutrality and subsidiarity-of the single market. The trade-offs between the implications of these tenets-harmonization and diversity, respectively-can be reconciled by a bottom-up strategy of strengthening source-based taxation and narrowing differences in tax rates. The strategy starts with dual income taxation, proceeds with final source withholding taxes and rate coordination, and is made complete by comprehensive business income taxation. Common base and cash flow taxation are not favored. Keywords

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Section: Comprehensive Business Income Tax (Cbit)mentioning

confidence: 99%

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Cnossen

2017

Int Tax Public Finance

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“…Possible options to reform national tax systems are at the heart of an ongoing political and academic debate (e.g. Mirrlees et al (2011), de Mooij andDevereux (2011)). Conventional tax systems are known to be nonneutral since they tax an investment's full return.…”

Section: Introductionmentioning

confidence: 99%

“…A strictly microe-conomic foundation, however, prevents those models from being applicable for purposes other than the identification of tax incentives on representative agents. Furthermore, general equilibrium models were successfully applied to evaluate the impact of an ACE regime on welfare (Fehr and Wiegard (2003), Keuschnigg and Dietz (2007), Radulescu and Stimmelmayr (2007), de Mooij and Devereux (2011), Oropallo and Parisi (2005)). Since those models usually also resort to representative agents calibrated according to national accounts data, the truly existing firm-level heterogeneity with respect to business and tax status is also underrepresented in those approaches.…”

Section: Introductionmentioning

confidence: 99%

Assessing the Impact of Introducing an ACE Regime - A Behavioural Corporate Microsimulation Analysis for Germany

2014

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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. May 2014Abstract: In their famous Mirrlees review (2011) on reforming the tax system for the 21st century, the authors put forward the introduction of an allowance for corporate equity regime. In recent years, several countries introduced an ACE regime. The main feature of an ACE regime is that it removes tax distortions on marginal investment and finance distortions. Yet, by narrowing the tax base an ACE regime potentially requires an increase in tax rates which might affect location choices and profit shifting activity negatively. In this paper, we employ a microsimulation model to determine the consequences of introducing an ACE regime in Germany. The simulation results show that granting an ACE for corporate income tax purposes results in a revenue loss of about 18%. This could be financed by an increase of the combined profit tax rate by 6 percentage points. At firm level, our analysis illustrates the heterogeneous distribution of the reform effect accross the sample. For 50% of firms between the 25th and 75th percentile, introducing an ACE regime reduces tax payments between 35% and 2%. If the ACE is combined with a tax rate adjustment, the tax effect ranges between -32% and +7.1% for firms between the 25th and 75th percentile. With respect to behavioural responses on decision margins, we find that introducing the ACE reduces the mean debt-ratio by about 1.5 percentage points in the short run. For the capital-stock we arrive at a mean short-term increase of 2.4%. Finally, our computations show that the ACE regime with adjusted profit tax rate cannot be overall tax neutral. In particular, the increase in the profit tax rate required to finance the equity allowance induces intensified outward profit-shifting activities and affects location choices negatively. In the short-run the tax revenue is therefore shown to decline to about 95% of its original level.

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“…De Mooij and Devereux () compared the consequences for European countries of moving towards either an ACE or a CBIT. They used a computable general equilibrium approach that enabled simulations to be made for the impact on macroeconomic indicators, such as investment and growth, for individual countries making either reform.…”

Section: Defining the Tax Basementioning

confidence: 99%

How Should Business Profit Be Taxed? Some Thoughts on Conceptual Developments During the Lifetime of the IFS^*

Devereux

2019

Fiscal Studies

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This paper reviews developments since the 1970s in economic thinking about the design of taxes on business profit. It charts developments from proposals for a cash flow tax from the Meade Committee, to refinements of this in the form of an ‘Allowance for Corporate Equity’ and the levying of the cash flow tax in the country of destination. It describes how the development of international trade and investment has led to ever‐increasing problems in the international tax system with respect to economic efficiency, profit shifting, complexity and tax competition. It also identifies why a response to these problems requires a major reform in the location of taxation.

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An applied analysis of ACE and CBIT reforms in the EU

Cited by 76 publications

References 19 publications

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Assessing the Impact of Introducing an ACE Regime - A Behavioural Corporate Microsimulation Analysis for Germany

How Should Business Profit Be Taxed? Some Thoughts on Conceptual Developments During the Lifetime of the IFS^*

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An applied analysis of ACE and CBIT reforms in the EU

Cited by 76 publications

References 19 publications

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Assessing the Impact of Introducing an ACE Regime - A Behavioural Corporate Microsimulation Analysis for Germany

How Should Business Profit Be Taxed? Some Thoughts on Conceptual Developments During the Lifetime of the IFS*

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How Should Business Profit Be Taxed? Some Thoughts on Conceptual Developments During the Lifetime of the IFS^*