The relevance of depreciation allowances as a fiscal policy instrument: A hybrid approach to CCCTB?
Kunka Petkova () and
Alfons Weichenrieder ()
Empirica, 2020, vol. 47, issue 3, No 6, 579-610
Abstract A major goal of the EU Commission in the area of direct taxation is the introduction of a common consolidated corporate tax base in Europe. While hardly discussed in the literature, such a system would limit national discretion over tax depreciation. In a sample of up to 47 countries, we find that the probability of a tax reform that improves the depreciation allowances increases, if the macroeconomic situation is weak. This suggests that changes in depreciation allowances are used as a fiscal instrument for stabilization. A common consolidated tax base deprives national governments from implementing investment incentives via accelerated depreciation. This paper discusses the possible implementation of a hybrid system that combines features of formula apportionment and separate accounting. Such a hybrid system may substantially mitigate transfer pricing problems and other tax planning issues, whilst preserving national discretion over depreciation allowances.
Keywords: CCCTB; Corporate taxation; Investment incentives; Macro fiscal policy (search for similar items in EconPapers)
JEL-codes: H2 (search for similar items in EconPapers)
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