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

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4.5 Summary of EU-wide effects of the CCCTB 56 5 European corporate income tax 57 6 Conclusions 59 References 60 Appendix A Modelling firm behaviour in CORTAX 63 Appendix A2 Country tables baseline scenario 73 Appendix B Country tables CCTB 75 Appendix C Country tables CCCTB 104 Appendix D Country tables EUCIT 142 4
1 Introduction This report analyses the economic effects of reforms at the EU level in corporate income taxation systems. The first set of reforms include a common corporate tax base in the EU (CCTB) along the lines of proposals by the CCCTB Working Group. The second set of reforms adds to the common base a shift from separate accounting towards consolidation with formula apportionment. It is labelled: the common consolidated corporate tax base (CCCTB). The third set of reforms combines the CCCTB with harmonisation of the tax rate across Member States, the European corporate income tax (EUCIT). In quantifying the economic implications of the harmonisation proposals, we combine information from microdata on European companies, the ORBIS database, with a computable general equilibrium model, CORTAX. Calculations with the ORBIS database provide detailed information on the implication of the tax reforms for the cost of capital (adopting the methodology of Devereux and Loretz, 2008ab). The economic effects of these changes in the cost of capital are investigated with CORTAX, a computable general equilibrium model that has been designed to analyse corporate taxes in the European Union (Bettendorf et al. 2006, Van der Horst et al. 2007). An earlier version of this model has been updated for this study by using more recent data. Moreover we have extended the model to cover all 27 Member States of the EU and by modelling additional economic mechanisms such as effects via tax havens outside the EU and discrete location choices. Also loss probabilities have been modelled to analyse the welfare implications of loss consolidation relative to loss carry forward. The report starts in section 2 with a description of the CORTAX model and its calibration, which is partly based on the ORBIS database. Section 3 shows simulation outcomes for a common corporate tax base (CCTB) in Europe under a number of alternative assumptions, e.g. regarding the deductions in the common base, the coverage of firms and the inclusion of some mechanisms in CORTAX. Section 4 discusses the impact of consolidation and formula apportionment and analyses proposals for a common consolidated corporate tax base (CCCTB). Section 5 discusses proposals for a European corporate income tax (EUCIT). Section 6 concludes. 5
Page 1 and 2: The economic effects of EU-reforms
Page 3: Contents 1 Introduction 5 2 The COR
Page 7 and 8: Household optimization yields expre
Page 9 and 10: In today’s corporate tax regimes
Page 11 and 12: Yet, not all forms of profit shifti
Page 13 and 14: companies which report total assets
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
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asic version of CORTAX. Note, howev
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5 European corporate income tax Thi
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6 Conclusions We have analysed the
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Devereux, M.P. and S. Loretz, 2008a
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Appendix A Modelling firm behaviour
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c b ∂cb + dbt = r − rb + τRb (
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capital requires that the marginal
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− b Π t −1 = Yt −1 − wLt
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Substituting into the dividend equa
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Appendix A2 Country tables baseline
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Appendix B Country tables CCTB The
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Table B.2: CCTB-WG25 for all firms
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Table B.4: CCTB-WG20 for multinatio
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Table B.6: CCTB-EUav for multinatio
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Table B.8: CCTB-WG20 for multinatio
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Table B.10: CCTB-WG20 for multinati
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Table B.16: CCTB-EUav for multinati
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Table B.20: CCTB-WG20, multinationa
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Table B.28: CCTB-EUav for multinati
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Table C.1: CCCTB-WG20 for all firms
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Table C.3: CCCTB-EUav for all firms
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Table C.5: CCCTB-WG25 for multinati
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Table C.11: CCCTB-WG20 for all firm
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Table C.13: CCCTB-EUav for all firm
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Table C.15: CCCTB-WG25 for multinat
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Table C.21: Decomposition CCCTB-WG2
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Table C.23: Decomposition CCCTB-WG2
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Table C.33: CCCTB-EUav for multinat
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Table D.1: EUCIT-WG20 for all firms
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Table D.3: EUCIT-EUav for all firms
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Table D.5: EUCIT-WG25 for all firms
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