The revenue consequences of using ccctb to determine taxable income in the eu member states
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The Revenue Consequences of Using CCCTB to Determine Taxable Income in the EU Member States. Andreas Oestreicher/ Reinald Koch Institute for Domestic and International Taxation University of Goettingen. Outline. Basic tax principles Data and methodology

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The Revenue Consequences of Using CCCTB to Determine Taxable Income in the EU Member States

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The revenue consequences of using ccctb to determine taxable income in the eu member states

The Revenue Consequences of Using CCCTB to Determine Taxable Income in the EU Member States

Andreas Oestreicher/Reinald Koch

Institute for Domestic and International Taxation

University of Goettingen

Reinald Koch University of Goettingen


Outline

Outline

Basic tax principles

Data and methodology

Empirical results of the Microsimulation

Investigation of influencing factors

Conclusion and outlook

Page 2

Reinald Koch University of Goettingen


Basic tax principles prevailing tax law

Basic tax principles: Prevailing tax law

27 separate tax systems: compliancecosts

Arm‘slengthprinciple: compliancecosts, potential double taxation

Taxation of intra-groupprofits: timingdisadvantages

Intra-grouplossoffsetusually limited todomesticgroups: timingor permanent disadvantages

Dividend taxation: potential double taxation

Reinald Koch University of Goettingen


Basic tax principles proposal by the european commission

Basic tax principles: Proposal by the European Commission

Study (2001) on tax obstacles in the Internal Market

Proposal: Introducing a Common Consolidated Corporate Tax Base

Harmonisation of tax accountingrules

Determination of taxableincome on a consolidatedbasis

Attribution of incomeaccordingto a uniform formula

Applicationcompulsoryor optional

Elimination of tax obstacles on a conceputal basis!

Reinald Koch University of Goettingen


The revenue consequences of using ccctb to determine taxable income in the eu member states

Basic tax principles: Proposalbythe European Commission

Example

* Value of loss carry-forward: 18

Reinald Koch University of Goettingen


Data and methodology data

Data and MethodologyData

Database AMADEUS

consolidatedandunconsolidatedfinancialstatements; companyprofiles

aboutninemillion European Companies

Update 125 (February 2005)

Periodcovered: 1994-2003

Companies included

Group companies (Control-Konzept)

Companies withincompleteinformationexcluded

Number of companiesincluded: 294,572 (23 Member States)

Reinald Koch University of Goettingen


Data and methodology methodology

Data and MethodologyMethodology

  • Three-stepanalysis:

  • Backward-lookingdetermination of revenueconsequencesbyapplying a comparativestaticmicrosimulation

  • Investigation of thefactors of influencefortheestimatedrevenueeffects (bivariate/multivariate regression)

  • Forward lookingestimation of futurerevenueeffects on thebasis of theregressionequation

Reinald Koch University of Goettingen


Data and methodology microsimulation model

Data and MethodologyMicrosimulation Model

Part of a jointresearchprojectwiththe Center for European Economic Studies (fundedbythe German Research Foundation)

Comparative-staticmicrosimulation

Tax revenue = total of profit tax paymentsmadebygroupcompanies

Indirectdetermination of tax paymentsstartingfromprofit/lossbefore tax

Adjustmentsmadeforinterperiod-lossoffset, intra-grouploss-offset, dividendtaxation

Applied Tax law:

Tax rates 1994-2003

Other provisions 2006

Reinald Koch University of Goettingen


Data and methodology measures included in simulation

Data and MethodologyMeasures included in simulation

Harmonisation of tax accounting rules

Elimination of intra-group profits

Non-taxation of intra-group dividends

Crossborder intra-group loss offset

Reallocation of tax base

Reinald Koch University of Goettingen


Results of the microsimulation eu wide revenue effects

Results of the microsimulationEU wide revenue effects

Reinald Koch University of Goettingen


Results of the microsimulation member state specific revenue effects

Results of the microsimulationMember state specific revenue effects

Reinald Koch University of Goettingen


Investigation of the factors of influence independent variables

Investigation of the factors of influenceIndependent variables

Reinald Koch University of Goettingen


Investigation of the factors of influence regression results

Investigation of the factors of influenceRegression results

Reinald Koch University of Goettingen


Conclusion and outlook

Conclusion and Outlook

Main results: EU tax revenueisreducedby 4.45 percent (compulsory CCCTB) and 4.57 percent (optional CCCTB)

Member State specificeffectdependsespecially on

theavailability of a grouptaxationregime in prevailing tax law,

the nominal tax rate and

theintroductionofoptionality

But: How do companies react to such a tax reform?

 Inclusion of behavioral responses = current work

Reinald Koch University of Goettingen


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