Will corporate tax consolidation improve efficiency in the EU?
Albert van der Horst,
Leon Bettendorf () and
Hugo Rojas-Romagosa
Additional contact information
Leon Bettendorf: CPB Netherlands Bureau for Economic Policy Analysis
No 141, CPB Document from CPB Netherlands Bureau for Economic Policy Analysis
Abstract:
Consolidation of the tax base in the European Union is expected to curve compliance costs and reduce profit shifting. A number of proposals for consolidation from the European Commission are simulated with the applied general equilibrium model CORTAX. We show that the benefits from consolidation are offset by two weaknesses in the proposals for a common consolidated tax base. Formula apportionment, which is needed to allocate the consolidated taxable profits across jurisdictions, creates new tax planning possibilities for MNEs and allows them to benefit from existing tax rate differentials in the European Union. In addition, it triggers tax competition as member states may attract foreign investment by reducing their tax rates. The second distortion is an unlevel playing field, which is introduced if only part of the firms participate in the consolidation. The gains from consolidation can be fully grasped if it is obliged for all firms and if it is accompanied by a harmonisation of the tax rate.
JEL-codes: F21 H21 H25 H87 (search for similar items in EconPapers)
Date: 2007-03
New Economics Papers: this item is included in nep-eec, nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (14)
Downloads: (external link)
https://www.cpb.nl/sites/default/files/publicaties ... ve-efficiency-eu.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cpb:docmnt:141
Access Statistics for this paper
More papers in CPB Document from CPB Netherlands Bureau for Economic Policy Analysis Contact information at EDIRC.
Bibliographic data for series maintained by ().