Two key issues in international tax policy are the extent to which differences in taxes between countries both affect the international allocation of production across countries, and introduce distortions into markets because competitors face different taxes. This research project sets out a new methodology to assess the extent to which the existing corporation tax regimes in the EU create these problems. It does so by constructing measures of effective tax rates which vary by company and by country. The methodology identifies variations in these effective tax rates to assess these two sources of distortion. The project assesses alternative systems, including the Common Consolidated Corporate Tax Base (CCCTB) under consideration by the European Commission. The CCCTB has mixed effects which depend on its precise structure.
Michael Devereux and Simon Loretz