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					            European Commission
            Taxation and Customs Union




   The impact and Design of Business Taxation in a Globalised World
                              London April 27 2009


   “Corporate Tax Consolidation and Enhanced
             Cooperation in the EU”
               L. Bettendorf, A. van der Horst, R. de Mooij and H. Vrijburg


                    Discussant            Ana AGUNDEZ GARCIA*

   *The views expressed here are those of the discussant and do not represent those
                            of the European Commission




London, 27th April 2009                  ETPF Conference                         1
         European Commission /
         Taxation and Customs Union




Paper’s objectives:


• Analysing effects of CCCTB when introduced by a sub-group of
  EU MS under Enhanced Cooperation Agreements (ECA)

• Very interesting area of research:
  - theoretical literature: theory of cooperative games, coalition
  formation, etc. (Burbidge et al (1997), Beaudry et al (2000),
  Bordignon and Brusca (2006), etc)
  - Applied research: here application of CORTAX, “state of the
  art” model for corporate tax in the EU… room for improving
  modelling?




London, 27th April 2009               ETPF Conference                2
         European Commission /
         Taxation and Customs Union




Main elements of the mechanism of Enhanced
Cooperation (EC, Title VII of the Treaty)

• EC is a last resort mechanism
• Minimum threshold of participating MS: 8
• Requires authorisation by qualified majority in Council
  (but no veto rights)
• All MS may participate in deliberations but only
  participating MS vote to adopt decisions
• Principle of openness: open to all MS at any time.
  Falicitate participation by as many MS as possible.
• Aims at reinforcing the process on integration within the
  EU (and not undermine Single market, trade,
  competition, etc)


London, 27th April 2009               ETPF Conference     3
         European Commission /
         Taxation and Customs Union




Elements of this institutional framework
in the study?

 * Paper assumes exogenously given coalitions and an
 exogenously given policy: the same policy in principle
 applicable to the EU-27…but NOT necessarily so!!
 Participating MS decide on the policy they are going to apply,
 which may be different to that proposed EU-wide.

 Implications for the model: eg. assume that ECA-common tax
 base = average tax base of participating countries (rather than
 EU-27 average)

 * The dynamics of enhanced cooperation: EC is an
 instrument of “progressive integration”. Paper should analyse
 further possible developments in the long/term, further countries
 joining, etc.



London, 27th April 2009               ETPF Conference              4
         European Commission /
         Taxation and Customs Union




Other comments on the choices made on CORTAX in
this paper (I)

• Preferable to use corporate tax rates as compensation
  mechanism: changes in statutory tax rate and EATR
  more interesting to analyse profit shifting and location
  decisions effects.
• Extended version of CORTAX, including tax havens and
  location decisions: better framework to study the
  possibilities for CCCTB policy to be successful for
  implementing countries vis-à-vis the rest of the world
• Reduction of compliance costs under CCCTB: calibration
  should be adjusted to the number of participating
  countries because the perimeter of consolidation/ALP
  changes.

London, 27th April 2009               ETPF Conference        5
         European Commission /
         Taxation and Customs Union




 Other comments on the choices made on CORTAX in
 this paper (II)

• Loss consolidation:
  - Broader definition of the common tax base in the first
  place, so that the “net tax base” (after loss compensation)
  ≈ current EU average (or participating MS’)

 - Gerard and Weiner (2006): “…apportionment provides
 governments with an insurance or risk-sharing mechanism
 against revenue loses in case of a bad state of nature (i.e.
 losses) on its territory”
With FA: all jurisdictions get positive shares of tax
 bases…Implications for the “geographical distribution” of
 losses in the calibration?


London, 27th April 2009               ETPF Conference      6
         European Commission /
         Taxation and Customs Union




Other comments on the choices made on CORTAX in
this paper (III)


• Sales by Destination!!
  - ex-ante effects: distribution to place of consumption
  rather than place of production
  - ex-post effects: demand is less “manipulable” by firms
  than other factors

Instead, Sales by Origin (Turnover) duplicates the weight
   of capital and labour in apportionment (specially of the
   later)




London, 27th April 2009               ETPF Conference         7
         European Commission /
         Taxation and Customs Union




                      THANK YOU FOR YOUR ATTENTION!




London, 27th April 2009               ETPF Conference   8

				
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