Can formula apportionment really prevent multinational enterprises from profit shifting? : the role of asset valuation, intragroup debt, and leases
Dirk Kiesewetter; Tobias Steigenberger; Matthias Stier
The European Commission has been supporting a transition from a system of separate accounting to a system of formula apportionment. In 2011, it presented a proposal for a council directive on a Common Consolidated Corporate Tax Base (CCCTB). Formula apportionment is often considered more resistant to profit shifting and assumed to reduce compliance costs. We use a dynamic model of tax accounting based on neoclassical investment theory and effective tax rates to determine whether, and to what extent, formula apportionment mitigates the efficiency of typical profit-shifting measures. We focus on the roles of transfer pricing and intragroup debt financing (through loans and leases) under both separate accounting and formula apportionment. Our results show that instead of eliminating tax planning strategies, the proposed system will simply induce a shift from manipulating reported profits to influencing the apportionment key. Inside the European Union, the CCCTB may be able to render thin capitalisation rules and transfer pricing documentation redundant. However, formula apportionment invites new forms of tax planning involving manipulating the book value of assets rather than profit shifting.
Year of publication: |
2014
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Authors: | Kiesewetter, Dirk ; Steigenberger, Tobias ; Stier, Matthias |
Publisher: |
Berlin : Arbeitskreis Quantitative Steuerlehre (arqus) |
Subject: | Effective Tax Rate | CCCTB | Formula Apportionment | Tax Planning | Profit Shifting | Debt Financing | Leasing | Multinationales Unternehmen | Transnational corporation | Konzernbesteuerung | Group taxation | Gewinnverlagerung | Income shifting | Unternehmensbesteuerung | Corporate taxation | Fremdkapital | Debt financing | Theorie | Theory | Körperschaftsteuer | Corporate income tax | Verrechnungspreis | Transfer pricing | Kapitalstruktur | Capital structure | Steuerplanung | Tax planning |
Saved in:
freely available
Extent: | Online-Ressource (34 S.) graph. Darst. |
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Series: | Disskussionsbeitrag / Arqus, Arbeitskreis Quantitative Steuerlehre. - Berlin : Arqus, ISSN 1861-8944, ZDB-ID 2213024-X. - Vol. 175 |
Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature |
Language: | English |
Notes: | Systemvoraussetzungen: Acrobat Reader |
Other identifiers: | hdl:10419/102675 [Handle] |
Classification: | H20 - Taxation, Subsidies, and Revenue. General ; F21 - International Investment; Long-Term Capital Movements ; D21 - Firm Behavior |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10010410351