The European Commission's proposal for a common consolidated corporate tax base

Fuest, Clemens

doi:10.1093/oxrep/grn032

Cited by 41 publications

(20 citation statements)

References 16 publications

(14 reference statements)

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“…The debate about relative merits of FA versus SA has recently been intensified in the European context, where the European Commission in 2001 proposed to introduce FA within EU borders (see Fuest, 2008, for a discussion of the reform's details). Under FA, profit is consolidated at the group level and apportioned to the affiliates according to a formula that measures the affiliates' relative corporate activities.…”

Section: Introductionmentioning

confidence: 99%

Strategic Consolidation Under Formula Apportionment

Buettner¹,

Riedel²,

Runkel³

2011

National Tax Journal

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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. Terms of use: Documents in Strategic Consolidation under Formula Apportionment AbstractThis paper argues that profit-shifting activities of multi-jurisdictional enterprises (MJE) are maintained under a tax system of consolidation and formula apportionment (FA). A theoretical model discusses how an MJE can exploit its impact on the definition of the consolidated group strategically. The analysis shows that the MJE will run individual affiliates as separate un-consolidated firms for tax purposes if intra-group tax-rate differences, and thereby potential gains from profit-shifting, are large. We test this prediction using confidential firm-level tax-return data for the local business tax in Germany. The identification strategy exploits a quasi experiment derived from a major company tax reform in 2001 that reduced the costs associated with separating out individual affiliates. Our results show that, evaluated at the sample mean, an increase in the tax-rate variance among the MJE's affiliates by one standard deviation reduces the number of consolidated affiliates by 20%.JEL Code: H32, H73.

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Section: Introductionmentioning

confidence: 99%

Strategic Consolidation Under Formula Apportionment

Buettner¹,

Riedel²,

Runkel³

2011

National Tax Journal

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“…The sales factor reflects the demand side, while the labour and the property factor reflect the supply side (Petutschnig 2010). According to Fuest (2008), the basic idea underlying the sharing mechanism for the tax base is that companies should pay taxes in the proportion to their economic presence in a country, which is measured by the presence of employees, assets and sales. Fuest (2008) also argued, that the differences in tax rates will give rise to other distortion caused by the formula factors.…”

Section: Doi: 1017221/222/2015-agriceconmentioning

confidence: 99%

“…According to Fuest (2008), the basic idea underlying the sharing mechanism for the tax base is that companies should pay taxes in the proportion to their economic presence in a country, which is measured by the presence of employees, assets and sales. Fuest (2008) also argued, that the differences in tax rates will give rise to other distortion caused by the formula factors. For example, in the situation where every EU Member State can apply for its own tax rate, the incorporation of payroll costs in the allocation formula will affect employment between the EU Member States.…”

Section: Doi: 1017221/222/2015-agriceconmentioning

confidence: 99%

Tax sharing under the Common Consolidated Corporate Tax Base: Measurement of the profit generating factors in the agriculture sector

Nerudová¹,

Krchnivá²

2016

AGR ECON-CZECH

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Th e allocation formula for the distribution of the Common Consolidated Corporate Tax Base (CCCTB) should be based on three macroeconomics factors which are considered to have the largest impact on profi tability. Th e paper researches the ability of the allocation formula factors to explain variability in profi t/loss generation of single enterprises from the perspective of the Czech Republic with the special focus on the explanation power of the allocation formula on profi t/ loss generation of companies operating in the agriculture sector (NACE A). Th e analysis is based on the comparison of the coeffi cients of determination as an indicator of the explained variability of the proposed simple as well as the multiple regression models. Th e paper concludes that proportion of explained profi tability by the formula factors as are defi ned by the Draft Directive on a Common Consolidated Corporate Tax Base can diff er by more than 30% with regard to the sector of economic activity classifi ed by the NACE, whereas in the individual subsectors of the agriculture the diff erence may amount to 40%.

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“…In response to profit shifting and tax competition, the European Commission suggested a transition from separate accounting to a common tax base and formula apportionment (see European Commission, 2001). Although the idea seems like a good one at first glance, since its inception the proposed benefits, namely a reduction in compliance costs, tax planning, and tax competition, have been seriously challenged (see, for an overview, Fuest, 2008). However, at the subnational level, formula apportionment is common; examples are, corporate taxation in the US and Canada and the German local business tax ("Gewerbesteuer").…”

Section: Introductionmentioning

confidence: 99%

Asymmetric tax competition with formula apportionment

Wrede

2013

Lett Spat Resour Sci

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This paper analyzes asymmetric tax competition under formula apportionment. It sets up a model with multinationals where two welfare-maximizing jurisdictions of different size levy source-based corporate taxes and allocate taxes using the formula approach. At the Nash equilibrium, tax rates are too low and public goods quantities are to small. The paper shows that the larger country levies a larger tax rate compared to the smaller country as it does under separate accounting. Citizens of the larger country are worse off than those of the smaller country.JEL Classification: H25, H42, H73.

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The European Commission's proposal for a common consolidated corporate tax base

Cited by 41 publications

References 16 publications

Strategic Consolidation Under Formula Apportionment

Strategic Consolidation Under Formula Apportionment

Tax sharing under the Common Consolidated Corporate Tax Base: Measurement of the profit generating factors in the agriculture sector

Asymmetric tax competition with formula apportionment

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