An applied analysis of ACE and CBIT reform in the EU

Ruud de Mooij and Michael Devereux

No 128, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We assess the quantitative impact of two reforms of the corporation tax that would eliminate the differential treatment of debt and equity. We assess the quantitative impact of two reforms of the corporation tax that would eliminate the differential treatment of debt and equity. The two reforms are: the allowance for corporate equity (ACE), and the comprehensive business income tax (CBIT). We investigate the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budgets, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less, efficient. A combination of ACE and CBIT is always welfare improving.

JEL-codes: D58 H25 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-acc and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: An applied analysis of ACE and CBIT reforms in the EU (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:128

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