ZEW Corporate Taxation Microsimulation Model (ZEW TaxCoMM)

Abstract

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.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08117.pdf Non-Technical SummaryPolitical discussion in Germany and other European countries revealed the outstanding relevance accorded to revenue and distribution effects of tax reforms in the field of corporate taxation. Both issues are taken as crucial determinants for the feasibility and sustainability of tax systems thus eclipsing systematic aspects of taxation at least partially. So far, the coverage of existing quantitative approaches on the impact of corporate taxation does not reflect this demand. Widely recognised approaches focus on the computation of effective tax burdens thus providing important insights into the incentives of taxation. Unfortunately, these models do not allow robust conclusions on revenue impacts and distributional consequences of tax reforms. In view of the scarce evidence on these issues at least at corporate level, the intention of this paper is to put forward an instrument explicitly allowing for policy analysis of corporate tax reforms. The proposed corporate microsimulation model has been developed at the Centre of European Economic Research (ZEW) in collaboration with the University of Mannheim.The idea of this paper is to employ the methodology of microsimulation for policy analyses since this methodology captures structural differences of micro units and is thus appropriate to draw conclusions on the individual financial impacts of tax reforms. The key feature of the proposed corporate microsimulation model consists in processing financial statements taken from the DAFNE data base of the Bureau van Dijk and deriving the tax base for corporate income tax and trade tax endogenously. In this context the consideration of firm specific balance-sheet data and profit and loss account data provides a linkage to the real economic sphere which is crucial to account for the real development of corporations over time, to capture changes in the legal framework adequately and later on to integrate behavioural responses to tax reforms. To simulate tax regulations according to a reference tax system or a reform proposal, the data-set is supplemented by survey data on tax accounting practices. It is shown that the distinct set-up of the proposed model can account for tax regulations in great detail.Among other elements of the corporate tax base, regulations governing depreciation, provisions, creditors and financial results for tax purposes are conside...

How to Support (Political) Decisions? Presentation of a Micro-simulation Model to Assess the Implications of EU-wide Tax Reforms

“…Based on the necessary input data as well as the accuracy, existing artifacts can be classified into macro-economic models and models, which process individual (micro-)data [22]. Although macro-economic models allow for the consideration of taxes, micro-simulation models are more suitable for assessing implications induced by tax reforms, because of the opportunity to explicitly process individuals' characteristics as well as more detailed tax-provisions [5,16,24]. Within micro-simulation models, two types of models can be distinguished [16].…”

“…The DIECOFIS model [20] is a one-period model and was applied for an analysis of an Italian tax reform. The German model BizTax [2] and the German TaxCoMM model [24] apply a static micro-simulation approach and quantified the impacts resulting from the German tax reform 2008 [1,9]. The above mentioned models are limited to a single country.…”

Provisions for Future Liabilities and Effective Corporate Income Tax Rate

“…The forward-looking methodology is particularly attractive for international comparisons 3 . However, as it uses a model-firm approach and takes into account only selected rules determining the tax base, it is first and foremost applicable in research on tax incentives considering location, investment and capital structure choices and the obtained results cannot be generalised [Reister et al, 2008].…”

“…Moreover, it is appropriate for studying effective taxation across industries and different company sizes. Backward-looking effective average corporate tax rates are calculated as ratios of the individual tax liability and a pre-tax investor's objective variable [Reister et al, 2008]. A wide range of such variables can be chosen.…”

Design, Implementierung und Anwendung eines dynamischen Mikro-Simulationsmodells zur Abschätzung von Steuerreformen in Deutschland und der Europäischen Union

“…Micro-simulation models have been used for many years to assess the consequences of possible tax reforms with regard to housholds' tax burden. In more recent years, such models have increasingly been employed with respect to company taxation (Bach et al, 2008;Castellucci et al, 2003;Creedy & Gemmell, 2007;Oestreicher & Koch, 2011;Oropallo & Parisi, 2005;Reister et al, 2008). Existing micro-simulation models for the corporate sector usually refer to a single country and a specific period in the past and are designed to capture as much detail as possible about the specific country's tax rules ("standard approach").…”