An Empirical Investigation into the Design of an EU Apportionment Formula Related to Profit Generating Factors

A. Roggeman, I. Verleyen, P. van Cauwenberge () and C. Coppens
Additional contact information
C. Coppens: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: The European Commission (EC) has the intention to establish a Common Consolidated Corporate Tax Base, which requires an allocation formula to fairly distribute the consolidated tax base among all group entities. A fair distribution would mean that the allocation is closely related to the profit generating factors of the underlying entities. The EC supposes that fixed tangible assets, sales and labour are the dominant factors in the generation of profit. This paper analyses the profit generating capacity of these factors and of the alternative factor intangible assets. The results show that the proposed factors only explain 28% of the variation in profit. Moreover, the results indicate that recognized intangibles do not increase R2 significantly. However, for R&D intensive companies, adding the market less book value to proxy for unrecognized intangibles, increases the explanatory power with 30%. This suggests that for these companies unrecognized intangibles could be important in generating profit.

Keywords: CCCTB; apportionment formula; fairness; international corporate taxation; European Union (search for similar items in EconPapers)
JEL-codes: D63 F23 H25 H87 (search for similar items in EconPapers)
Pages: 2 pages
Date: 2012-09
New Economics Papers: this item is included in nep-acc and nep-eur
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_12_813.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:rug:rugwps:12/813

Access Statistics for this paper

More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe ().