The relevance of depreciation allowances as a fiscal policy instrument: A hybrid approach to CCCTB?
- 9 Downloads
A major goal of the EU Commission in the area of direct taxation is the introduction of a common consolidated corporate tax base in Europe. While hardly discussed in the literature, such a system would limit national discretion over tax depreciation. In a sample of up to 47 countries, we find that the probability of a tax reform that improves the depreciation allowances increases, if the macroeconomic situation is weak. This suggests that changes in depreciation allowances are used as a fiscal instrument for stabilization. A common consolidated tax base deprives national governments from implementing investment incentives via accelerated depreciation. This paper discusses the possible implementation of a hybrid system that combines features of formula apportionment and separate accounting. Such a hybrid system may substantially mitigate transfer pricing problems and other tax planning issues, whilst preserving national discretion over depreciation allowances.
KeywordsCCCTB Corporate taxation Investment incentives Macro fiscal policy
Kunka Petkova: Financial support by the Austrian Science Fund (FWF): W1235-G16 is gratefully acknowledged. Alfons J. Weichenrieder: This research is also part of the research program of the LOEWE Center SAFE. Research assistance by Eren Gürer and help with our data inquiry (CBT Tax Base) by Michael Devereux are highly appreciated. We would also like to thank an anonymous referee for very helpful remarks and suggestions, as well as Marko Koethenbuerger, Steeve Mongrain, Leslie Robinson, Martin Zagler, Eva Eberhartinger, the participants of the workshop on Macroeconomic Policy in the Eurozone, the participants of the 74th Annual Congress of the International Institute of Public Finance, the participants of the 2018 ZEW Public Finance Conference, and the participants of the DIBT research seminar for their helpful comments.
- Angrist J, Pischke JS (2009) Mostly harmless econometrics an empiricist’s companion. Princeton University Press, PrincetonGoogle Scholar
- EU Commission (2011) Proposal for a council directive on a common consolidated corporate tax base, COM 121/4, BrusselsGoogle Scholar
- EU Commission (2016) Proposal for a council directive on a common corporate tax, COM 685 final, BrusselsGoogle Scholar
- Gammie M, Giannini S, Klemm A, Oestreicher A, Parascandolo P, Spengel C (2005) Achieving a common consolidated corporate tax base in the EU. Centre for European Policy Studies, BrusselsGoogle Scholar
- Hines JR (1999) Lessons from behavioral responses to international taxation. Natl Tax J 52(2):305–322Google Scholar
- Kari S, Laitila J, Ropponen O (2018) Investment incentives and tax competition under allowance for growth and investment (AGI), working paper, VATT Institute for Economic ResearchGoogle Scholar
- Kiesewetter D, Steigenberger T, Matthias S (2014) Can formula apportionment really prevent multinational enterprises from profit shifting?—The role of asset valuation. Intragroup Debt, and Leases, arqus Discussion Paper No. 175, SSRN 2512174Google Scholar
- Ohrn E (2015) Investment and employment responses to state adoption of federal accelerated depreciation policies. Department of Economics, Grinnell College, GrinnellGoogle Scholar
- PwC (2017) Worldwide tax corporate taxes 2016/17. www.PWC.com
- Sinn HW (1987) Capital income taxation and resource allocation. Eslevier, AmsterdamGoogle Scholar
- Vascega M, van Thiel S (2011) The CCCTB proposal: the next step towards corporate tax harmonization in the European union? Eur Tax 51:374Google Scholar
- Wissenschaftlicher Beirat beim Bundesfinanzministerium (2017) Steuervergünstigungen und EU-Beihilfenaufsicht: Problematik und Ansätze zur Lösung des Kompetenzkonflikts mit der Steuerautonomie, BerlinGoogle Scholar