International Tax and Public Finance

, Volume 11, Issue 1, pp 91–115 | Cite as

Company Tax Reform in the European Union

  • Peter Birch Sørensen


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.

corporate tax reform in the EU formula apportionment tax harmonization 


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Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Peter Birch Sørensen
    • 1
    • 2
  1. 1.Institute of Economics and EPRUUniversity of CopenhagenDenmark
  2. 2.CESifoMunichGermany

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