Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities

WU International Taxation Research Paper Series No. 2012-04

SFB International Tax Coordination Discussion Paper No. 38

30 Pages Posted: 12 Feb 2013

See all articles by Matthias Petutschnig

Matthias Petutschnig

Vienna University of Economics and Business

Multiple version iconThere are 2 versions of this paper

Date Written: 2012

Abstract

The European Commission is currently working on a legislative draft to harmonize the corporate income tax provisions for multinational groups of companies throughout the European Union. For that purpose the European Commission has installed a working group with the mission to draft a Common Consolidated Corporate Tax Base (CCCTB) applicable for multinational companies. As the EU member states are not willing to surrender their taxing power to the supranational level of the EU each group entity’s tax base would be determined by apportionment of the group’s overall taxable income according to a predefined micro-economic factor based formula whereas the group income will be calculated by consolidating earnings beforehand separately determined by each group entity (preconsolidation income). The situs state of the particular group entity would then apply its statutory corporate tax rate on the apportioned tax base. This paper evaluates the effects of this prospective apportionment procedure on any given corporate group entity and finds that the share of the group’s income allocated to a particular entity using the apportionment formula does regularly not equal the pre-consolidation income of the respective group entity. The reasons for this regular observable deviation can be found on the one hand in the concept of the apportionment formula and on the other hand in the specifics of the definitions of the apportionment factors.

Keywords: CCCTB, formulary apportionment, group taxation

Suggested Citation

Petutschnig, Matthias, Common Consolidated Corporate Tax Base: Effects of Formulary Apportionment on Corporate Group Entities (2012). WU International Taxation Research Paper Series No. 2012-04, SFB International Tax Coordination Discussion Paper No. 38, Available at SSRN: https://ssrn.com/abstract=2178004 or http://dx.doi.org/10.2139/ssrn.2178004

Matthias Petutschnig (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Building D 3
Vienna, Wien A-1020
Austria

HOME PAGE: http://www.wu.ac.at

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
397
Abstract Views
2,221
rank
85,370
PlumX Metrics