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The relevance of depreciation allowances as a fiscal policy instrument: A hybrid approach to CCCTB?

  • Kunka Petkova
  • Alfons J. WeichenriederEmail author
Original Paper


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.


CCCTB Corporate taxation Investment incentives Macro fiscal policy 

JEL Classification




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.


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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Doctoral Program in International Business Taxation (DIBT)Vienna University of Economics and BusinessViennaAustria
  2. 2.Faculty of Economics and Business AdministrationGoethe University Frankfurt, Vienna University of Economics and Business & CESifoFrankfurt am MainGermany

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