The Influence of Allocation Formula on Generation of Profit in Different Economy Sectors

Abstract

The mechanism for the distribution of the Common Consolidated Corporate Tax Base will be based on three macroeconomics factors which are considered to be the main indicators of generated profi t/ loss. The paper analyzes the explanatory power of proposed allocation formula for the distribution of the Common Consolidated Corporate Tax Base with respect to the sector of economic activity from the perspective of the Czech independent enterprises. The research is based on the comparison of the coeffi cients of determination indicating the proportion of explained variability of proposed multiple regression models. The paper concludes that the proportion of explained profi tability by the allocation formula factors as are defi ned by the Common Consolidated Corporate Tax Base Dra Directive may diff er up to 34% with regard to the sector of economic activity classifi ed by NACE classifi cation.

The CCCTB Allocation Formula Game: The Performance of Economics Sectors

“…The analysis of the explanatory power of allocation formula was based on the comparison of the coefficients of determination indicating the proportion of explained variability of examined regression model. The similar study was previously performed by Roggeman et al (2012), Krchnivá and Nerudová (2015) or Krchnivá (2015). Roggeman et al (2012) researched whether the factors entering the CCCTB formula may be considered as a main profit generating factors based on firm-level data from Amadeus database for the European manufacturing and service sector in the year 2008 4 .…”

“…She showed that the CCCTB formula factors are able to explain almost 35 per cent of the variability in profitability of companies, however, the composition of assets factor as the volume of total assets may have a larger impact on the generation of profit/loss since this factor reflects both fixed assets and financial assets, which in certain types of industry sectors could constitute an important indicator of profitability. Subsequently, Krchnivá and Nerudová (2015) analysed on the same data sample the explanatory power of the CCCTB formula in the individual economic sectors. They showed that in the most common economic sector in the Czech Republic (NACE sector G -Whole sale and retail trade; Repair of motor vehicles and motorcycles) the explanatory power reaches up to 30.33 per cent, respectively up to 26.33 per cent based on the results of restricted regression model.…”

Is there a Real Chance to Adopt the CCCTB without UK Participation in the EU?

“…The first is concentrated on the concept of the CCCTB in general and studies the impact of its implementation in national tax systems; this stream includes works such as Hulya and Hodžić (2017), Röder (2012), Nielsen, Raimondos-Møller andSchjelderup (2010), Bettendorf et al (2009), Dahle and Bäumer (2009), Andersson (2007), Barenfeld (2007) and Riedel and Runkel (2007). The second stream focuses mainly on the allocation formula factors with respect to the prediction of corporate income, and is represented by studies such as Mintz (2008) and Eberhartinger and Petutschning (2014), or with respect to the factors' explanatory power, Hines (2008), Roggeman et al (2012), Cobham and Loretz (2014), Krchnivá and Nerudová (2015) and Hundsdoerfer and Wagner (2020). The third stream of research includes studies on the impacts of the introduction of the CCCTB on the tax revenues of EU Member States, such as Fuest, Hemmelgarn and Ramb (2007), Brochner et al (2007), Oestreicher and Koch (2011), Oestreicher, Keser and Kimpel (2013), Devereux and Loretz (2008), van der Horst, Bettendorf and Rojas-Romagosa (2007), Bettendorf et al (2009), Cline et al (2010), Cobham et al (2017), Solilová and Nerudová (2018), Nerudová and Solilová (2019) and Hentze (2019).…”