If implemented, the European Commission’s plans for a Common Consolidated Corporate Tax Base (CCCTB) would be the most radical reform of international corporate taxation in Europe for a century. The Centre has undertaken significant research on a number of aspects of this proposal, and has been commissioned to undertake an impact assessment by the Commission.
Using unconsolidated accounting data for several thousand companies, we have investigated the likely impact on tax revenues in EU member states. Taking pre-tax profit as given, we estimate that overall EU corporation tax revenues would fall by 2.5% if companies have the option to participate. By contrast, if companies were denied this option, overall revenues would rise by more than 2%. This would leave some countries – such as Spain, Sweden and the United Kingdom - better off, but others – such as Denmark, Finland, Ireland and Italy - worse off. We investigate how sensitive these results are to the apportionment factors used.
We also assess the impact of the CCCTB on incentives to locate investment in different member states, taking into account the advantages of consolidation across member states, as well as the effects of apportionment. The results suggest that the CCCTB would significantly improve the balance of competition between companies resident in different countries. However, it would have only a small effect in reducing the impact of taxes on location decisions.