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CCCTB 4 EU? SA vs. FA w/ FTA

Author

Listed:
  • Ronald B Davies

    (University College Dublin)

Abstract
Since its conception, some within the European Union have expressed concerns over the ability of multinationals to avoid taxation by undertaking transfer pricing to shift profits towards low tax locations. These concerns have been growing, leading to a renewed call for a common consolidated corporate tax base wherein profits are allocated to nations according to a formula rather than firms’ internal prices. This paper analyzes the merits of such a shift in taxation. In particular, it is shown that, given tax rates, implementing formula apportionment can result in greater tax revenues and less intense tax competition particularly for lower trade barriers. However, this is not always the case and depends on parameter values, including those describing the extent of economic integration.

Suggested Citation

  • Ronald B Davies, 2012. "CCCTB 4 EU? SA vs. FA w/ FTA," Working Papers 201224, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:201224
    as

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    File URL: http://www.ucd.ie/t4cms/WP12_24.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
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    3. Ronald B. Davies & Johannes Voget, 2008. "Tax competition in an expanding European Union," Working Papers 200904, School of Economics, University College Dublin.
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    7. Guttorm Schjelderup & Lars Sorgard, 1997. "Transfer Pricing as a Strategic Device for Decentralized Multinationals," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 277-290, July.
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    9. Søren Bo Nielsen & Pascalis Raimondos–Møller & Guttorm Schjelderup, 2003. "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 419-437, April.
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    14. Ronald B. Davies, 2008. "Hunting High and Low for Vertical FDI," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 250-267, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Common Consolidated Tax Base; Vertical FDI; Formula Apportionment;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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