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
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 Income in the EU Member States

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 Income in the EU Member States

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 Income in the EU Member States

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


Basic tax Income in the EU Member Statesprinciples: Proposalbythe European Commission

Example

* Value of loss carry-forward: 18

Reinald Koch University of Goettingen


Data and methodology data
Data and Methodology Income in the EU Member StatesData

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 Methodology Income in the EU Member StatesMethodology

  • 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 Methodology Income in the EU Member StatesMicrosimulation 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 Methodology Income in the EU Member StatesMeasures 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 microsimulation Income in the EU Member StatesEU wide revenue effects

Reinald Koch University of Goettingen


Results of the microsimulation member state specific revenue effects
Results of the microsimulation Income in the EU Member StatesMember state specific revenue effects

Reinald Koch University of Goettingen


Investigation of the factors of influence independent variables
Investigation of the factors of influence Income in the EU Member StatesIndependent variables

Reinald Koch University of Goettingen


Investigation of the factors of influence regression results
Investigation of the factors of influence Income in the EU Member StatesRegression results

Reinald Koch University of Goettingen


Conclusion and outlook
Conclusion and Outlook Income in the EU Member States

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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