In October 2016 the European Commission released 3 Taxation Papers: Taxation Paper 64-2016 “The Impact of Tax Planning on Forward-Looking Effective Tax Rates”, Taxation paper 65-2016 “The Effects of Tax Reforms to Address the Debt-Equity Bias on the Cost of Capital and on Effective Tax Rates” and Taxation Paper 66-2016 “Modelling corporate tax reform in the EU: New calibration and simulations with the CORTAX model”. In this article we will focus on Taxation Paper 66-2016, although we will also provide links to the other 2 Taxation Papers published.
Taxation paper 66-2016
The Taxation Paper investigates the economic impact of the European Commission proposal for a common corporate tax base (CCTB) and a common consolidated corporate tax base with formula apportionment (CCCTB) within the EU. Furthermore, on top of the common base, it considers proposals to reduce the debt bias in corporate taxation. To do so, the authors employ an applied general equilibrium model (CORTAX) covering all EU Member States, featuring different firm types and modelling many key features of corporate tax regimes, including multinational profit shifting, investment decisions, loss compensation and the debt-equity choice of firms.
Subjects discussed in Taxation paper 66-2016 include a.o.:
· Properties of CORTAX
o Justification for using CORTAX
o Structure of CORTAX
o Calibration of CORTAX
§ Data sources and preparation
§ European Tax Systems and Model Baseline
· Common Tax Base Simulations
o Common Corporate Tax Base (CCTB)
§ Common Corporate Tax Base (CCTB) with Cross-border Loss Offset (CBLO)
o Common Consolidated Corporate Tax Base (CCCTB)
· Common Tax Base with Debt-Bias Simulations
o Introduction
o Simulation design
o Simulation results
o Closing remarks
· 5. Common Tax Base Sensitivity Simulations
o All firms – CCTB and CCCTB
o Broader and EU average common tax bases
o Stricter control on profit shifting
o Capital-labour substitutability
o Less compliance cost saving in CCCTB
o Compensate revenue gains and losses with labour taxes
o Discrete location choice for firms
o CCTB with Cross-border Loss Offset – All firms and with ACE
o Alternative deductibility shares and rates for ACE
o Alternative cap to CIT rate ex-ante adjustment
Click here to be forwarded to Taxation Paper 66-2016 “Modelling corporate tax reform in the EU: New calibration and simulations with the CORTAX model”.
Taxation Paper 64-2016
Click here to be forwarded to Taxation Paper 64-2016 “The Impact of Tax Planning on Forward-Looking Effective Tax Rates”.
Click here to download a zip-file with excel tables that the European Commission made available in this respect.
Taxation Paper 65-2016
Click here to be forwarded to Taxation Paper 65-2016 “The Effects of Tax Reforms to Address the Debt-Equity Bias on the Cost of Capital and on Effective Tax Rates”.
Click here to download a zip-file with excel tables that the European Commission made available in this respect.
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