EU companies face many tax obstacles in their EU-wide cross-border activities. These include the high compliance costs, the lack of cross-border loss-offset and the risk of double taxation as a result of conflicting rights between member states. To tackle these problems, the European Commission envisages putting forward a proposal for a tax reform that would allow improving the efficiency and simplicity of the corporate income tax systems in the EU. One policy option is the introduction of a Common Corporate Tax Base (CCTB) that would replace the current 27 tax codes for the computation of taxable income across member states by a single and common set of tax rules. The idea of this paper is to provide an analysis of the consequences which an adoption of a CCTB would have on effective tax burdens of EU companies located in each of the 27 member states, using the model of the European Tax Analyzer. The tax accounting rules considered are based on the proposals of the working group concerned with the Common Consolidated Corporate Tax Base and comprise concrete taxation rules for eight different elements of the tax base: depreciation rules, valuation of inventories, determination of production costs, treatment of R&D costs, provisions for future pension payments, provisions for legal obligations, avoidance of double taxation of dividend income and loss relief. Quantitative analyses executed for EU-27 average large and small and medium-sized companies show remarkable dispersions of effective tax burdens at corporate level across member states. Furthermore, the results indicate that the proposed CCTB has a considerable impact on effective tax burdens. Primarily caused by restrictive depreciation rules the concept would generally broaden the tax bases within the EU if all member states uniformly adopt a CCTB. Consequently, behind the background of revenue neutrality of an introduction of a CCTB the results suggest that the implementation of the analyzed common set of tax rules could be accompanied by a reduction of nominal tax rates within in EU member states.

Authors

Oestereicher, Andreas
Reister, Timo
Spengel, Christoph

Keywords

European Taxation, Tax Harmonization, Tax Accounting, Effective Tax Burdens