The economic effects of EU-reforms in corporate income tax systems

More documents

Recommendations

Info

mobile also between Europe and the rest of the world. In that case, also investment from Japan and the US can respond to the average corporate tax rate adopted in European countries. 2.2 Calibration of CORTAX CORTAX is calibrated for the 27 Member States of the European Union plus the US and Japan. We use data for 2005 to replicate national aggregates from national accounts data, such as consumption shares, labour-income shares, the average number of hours worked and foreign direct investment. Moreover, we make extensive use of information from the ORBIS database. A full description of the calibration process is given in Van der Horst et al. (2008). Here, we concentrate on parts of the calibration that are crucial for the outcomes of corporate tax reforms. 2.2.1 The ORBIS database The main source of microeconomic data used in the calibration of CORTAX is the ORBIS database, a comprehensive set of data of companies around the world. In the update currently used, it contains information on over 9 million companies. This large number is possible because the database contains unconsolidated reports of companies within corporate groups, a fact which we exploit in our analysis. ORBIS is provided by the Bureau van Dijk, which standardizes the balance sheet information collected from over 40 different information providers. In addition to balance sheet and profit and loss account items, the database also includes ownership information. The information on the ownership structure includes the name and number of shareholders, their country of residence and the percentage of ownership. The same information is available for the subsidiaries. The balance sheet data includes information about the assets structure, broken down into fixed, tangible and intangible assets, the current assets, stocks, debtors and cash and about the liabilities divided into current and non-current liabilities. The profit and loss accounts inter alia provide information about operating revenues, the cost of goods sold, gross profits, earnings before interest and taxes, financial revenues and expenses, taxation, profit and loss before and after tax. Additionally, memo lines like the number and cost of employees, interest payments and depreciation are available. Further data available for the companies includes their date of incorporation, the legal form, their NACE (4 digits) classification and their activity status. The ORBIS update of October 2006 contains data for the world top 9 million firms from 1993 to 2005. The criteria for selecting the top 9 million companies are based on turnover, number of employees and assets. For computational reasons we further restrict the sample to choice consider the statutory tax in a country relative to the European average. Only if a country reduces its tax rate below the European average will it become more attractive as a location for profitable investment projects. 12
companies which report total assets larger than two million US dollars. The exclusion of smaller companies is appropriate for our kind of research, as it is reasonable to assume that most of these companies are not incorporated and hence are not affected by the introduction of a CCCTB. In total we are left with 658,793 companies in the 27 EU member states for which we have ownership information and 429,922 observations for which all the necessary information is available. In a first step, we work out chains of ownership by merging the subsidiaries with majority shareholders within our sample. In combination with the information about the global owner provided by ORBIS directly, this allows us to attribute 256,294 companies to 86,940 different corporate groups. Out of these, 4,765 operate in more than one European country which implies that they will be affected by a potential consolidation of profits. In addition to the identification of the ultimate owner, the fact that we can identify the chain of ownership allows us to do robustness checks with different assumptions about the water’s edge. For example, as in Devereux and Loretz (2008a) it is possible to analyse how the results would be affected if non- European multinationals are only allowed to consolidate with direct ownership. The firm level data are used to calibrate CORTAX. This section presents some descriptive background statistics of ORBIS. The first column of Table 2.1 presents the number of firms/corporate groups in each country. The total number of firms is now only 340,558 (about 4/5 of the initial 430 thousand observations), which is due to the fact that we summed up 151,126 unconsolidated accounts into 61,896 groups. The next three columns present the country averages of the share of assets in buildings, machinery and intangibles. While ORBIS reports the size of the stocks and intangibles assets, it does not split the tangible assets into different kinds. We therefore make use of a study by McKenzie et. al. (1998), which reports size and industry specific assets structures to split the tangible assets into buildings, machinery and land. This approach is in line with Egger et al. (2008) and Devereux and Loretz (2008b). We define the shares relative to the sum of tangible assets, intangible assets and stocks, so they add up to one. It is noteworthy that land and stocks are not tax depreciable, however, the latter can influence the cost of capital depending on the rule for inventory valuation. 13
Page 1 and 2: The economic effects of EU-reforms
Page 3 and 4: Contents 1 Introduction 5 2 The COR
Page 5 and 6: 1 Introduction This report analyses
Page 7 and 8: Household optimization yields expre
Page 9 and 10: In today’s corporate tax regimes
Page 11: Yet, not all forms of profit shifti
Page 15 and 16: 2.2.2.1 Corporate tax rates Figure
Page 17 and 18: Table 2.3 Summary information about
Page 19 and 20: 2.2 shows the average debt share pe
Page 21 and 22: Figure 2.4 Corporate tax revenue in
Page 23 and 24: countries (each point representing
Page 25 and 26: Figure 2.7 Reduced-form elasticitie
Page 27 and 28: Figure 2.9 Reduced-form elasticity
Page 29 and 30: 2.3 Interpretation of results CORTA
Page 31 and 32: structured discussion about both th
Page 33 and 34: There is a variety of combinations
Page 35 and 36: Table 3.2 shows the economic effect
Page 37 and 38: of the fixed factor is smaller. Acc
Page 39 and 40: Table 3.4 Economic effects for the
Page 41 and 42: Table 3.5 Economic effects for the
Page 43 and 44: shows the impact of the CCTB-WG20 r
Page 45 and 46: 4.1.2 A scenario without profit shi
Page 47 and 48: shifting within the EU (see section
Page 49 and 50: eturns are taxed immediately and al
Page 51 and 52: other hand, loss consolidation caus
Page 53 and 54: Figure 4.2 Welfare effects of selec
Page 55 and 56: asic version of CORTAX. Note, howev
Page 57 and 58: 5 European corporate income tax Thi
Page 59 and 60: 6 Conclusions We have analysed the
Page 61 and 62: Devereux, M.P. and S. Loretz, 2008a
Page 63 and 64:
Appendix A Modelling firm behaviour
Page 65 and 66:
c b ∂cb + dbt = r − rb + τRb (
Page 67 and 68:
capital requires that the marginal
Page 69 and 70:
− b Π t −1 = Yt −1 − wLt
Page 71 and 72:
Substituting into the dividend equa
Page 73 and 74:
Appendix A2 Country tables baseline
Page 75 and 76:
Appendix B Country tables CCTB The
Page 77 and 78:
Table B.2: CCTB-WG25 for all firms
Page 79 and 80:
Table B.4: CCTB-WG20 for multinatio
Page 81 and 82:
Table B.6: CCTB-EUav for multinatio
Page 83 and 84:
Table B.8: CCTB-WG20 for multinatio
Page 85 and 86:
Table B.10: CCTB-WG20 for multinati
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Table B.16: CCTB-EUav for multinati
Page 93 and 94:
Page 95 and 96:
Table B.20: CCTB-WG20, multinationa
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Table B.28: CCTB-EUav for multinati
Page 105 and 106:
Table C.1: CCCTB-WG20 for all firms
Page 107 and 108:
Table C.3: CCCTB-EUav for all firms
Page 109 and 110:
Table C.5: CCCTB-WG25 for multinati
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Table C.11: CCCTB-WG20 for all firm
Page 117 and 118:
Table C.13: CCCTB-EUav for all firm
Page 119 and 120:
Table C.15: CCCTB-WG25 for multinat
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Table C.21: Decomposition CCCTB-WG2
Page 127 and 128:
Table C.23: Decomposition CCCTB-WG2
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Table C.33: CCCTB-EUav for multinat
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Table D.1: EUCIT-WG20 for all firms
Page 145 and 146:
Table D.3: EUCIT-EUav for all firms
Page 147 and 148:
Table D.5: EUCIT-WG25 for all firms
show all

The economic effects of EU-reforms in corporate income tax systems

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?