Company Tax Reform in the European Union

The European Commission recently proposed to move towards a consolidated tax base for European multinational companies, to be allocated across EU member states through a system of formula apportionment. This paper argues that while the Commission's blueprints for company tax reform may reduce e...

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Bibliographic Details
Published in:International tax and public finance 2004, Vol.11 (1), p.91-115
Main Author: Sørensen, Peter
Format: Article
Language:English
Subjects:
Apportionment
Approximation
corporate tax reform in the EU
Corporate taxation
Corporate taxes
Costs
Economic activity
Europe
European Union
Finance
Fiscal policy
formula apportionment
Harmonization
International taxation
Multinational corporations
Public expenditure
Public finance
Studies
Tax base
tax harmonization
Tax rates
Tax reform
Taxation
Transfer pricing
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Summary:The European Commission recently proposed to move towards a consolidated tax base for European multinational companies, to be allocated across EU member states through a system of formula apportionment. This paper argues that while the Commission's blueprints for company tax reform may reduce existing problems of transfer pricing, they will also create new distortions as long as existing tax rate differentials are maintained. The paper also investigates the changes in international tax spillovers which will occur as a result of a switch from the current system of separate accounting to formula apportionment. The final part of the paper discusses whether more conventional corporate tax harmonization should still be a long term policy goal for the EU and presents quantitative estimates of the efficiency gains from harmonization. Copyright Kluwer Academic Publishers 2004
ISSN:0927-5940
1573-6970
DOI:10.1023/B:ITAX.0000004778.63592.96