Can the CCCTB Alleviate Tax Discrimination Against Loss-Making European Multinational Groups?

34 Pages Posted: 31 May 2014 Last revised: 11 Mar 2015

See all articles by Regina Ortmann

Regina Ortmann

University of Paderborn; Vienna University of Economics and Business

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business

Date Written: 2014

Abstract

In March 2011, the European Commission submitted a proposal for a Council Directive on an optional common consolidated corporate tax base (CCCTB). If this proposed CCCTB system comes into force, taxes calculated under the currently existing system of separate accounting might be replaced by a system of group consolidation and formulary apportionment. Then, multinational groups (MNGs) would face the decision as to whether to opt for the CCCTB system. Prior research focuses mainly on the differences in economic behaviour under both systems in general. By con-trast, we study the conditions under which one or the other tax system is preferable from the per-spective of an MNG, with a particular focus on loss-offsets. We identify four effects that determine the decision of an MNG: the tax-utilization of losses, the allocation of the tax base, the dividend and intragroup interest taxation. We find mixed results, e.g., that the CCCTB system proves ad-vantageous for increasing loss/profit streams (e.g. from start-ups or R&D projects) of the individual group entities, whereas the system of separate accounting is beneficial for decreasing profit/loss streams (e.g. caused by a decrease in return from a mature product). The results of our analysis are helpful for MNGs facing the decision as to whether to opt for the CCCTB system and can also support legislators and politicians in the EU but also in other regions in their tax reform discussions.

Keywords: Loss-Offset, CCCTB, Separate Accounting, Investment Decisions

JEL Classification: H25, H21

Suggested Citation

Ortmann, Regina and Sureth-Sloane, Caren, Can the CCCTB Alleviate Tax Discrimination Against Loss-Making European Multinational Groups? (2014). WU International Taxation Research Paper Series No. 2014 - 08, Available at SSRN: https://ssrn.com/abstract=2442820 or http://dx.doi.org/10.2139/ssrn.2442820

Regina Ortmann (Contact Author)

University of Paderborn ( email )

Warburger Str. 100
Paderborn, D-33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Caren Sureth-Sloane

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
184
Abstract Views
1,868
rank
188,544
PlumX Metrics