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Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Sijbren Cnossen ()
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Sijbren Cnossen: CPB Netherlands Bureau for Economic Policy Analysis

International Tax and Public Finance, 2018, vol. 25, issue 3, 808-840

Abstract: Abstract This paper surveys and evaluates the corporation tax systems of the Member States of the European Union on the basis of a comprehensive taxonomy of actual and potential regimes, which have as their base either profits; profits, interest and royalties; or economic rents. The current regimes give rise to various instate and interstate spillovers, which violate the basic tenets—neutrality and subsidiarity—of the single market. The trade-offs between the implications of these tenets—harmonization and diversity, respectively—can be reconciled by a bottom-up strategy of strengthening source-based taxation and narrowing differences in tax rates. The strategy starts with dual income taxation, proceeds with final source withholding taxes and rate coordination, and is made complete by comprehensive business income taxation. Common base and cash flow taxation are not favored.

Keywords: Corporation tax; European Union; Tax coordination; Dual income tax; Comprehensive business income tax; Allowance for corporate equity; Rate of return allowance; Destination-based cash flow tax (search for similar items in EconPapers)
JEL-codes: H25 H32 H71 H73 H77 (search for similar items in EconPapers)
Date: 2018
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