Prague Economic Papers 2018, 27(4):427-448 | DOI: 10.18267/j.pep.660

The CCCTB Allocation Formula Game: The Performance of Economics Sectors

Kateřina Krchnivá1, Danuše Nerudová2
1 Faculty of Business and Economics, Mendel University, Brno, Czech Republic (k.krchniva@gmail.com)
2 Faculty of Business and Economics, Mendel University, Brno, Czech Republic (d.nerudova@seznam.cz)

The implementation of the Common Consolidated Corporate Tax Base (hereinafter CCCTB) in the European Union will probably have an impact on tax revenues of the concerned states since the distribution of the group tax base shall reflect the capacity to earn income by individual group members. This is secured by the employing of the allocation formula containing three factors that shall reflect the profit generating process of individual companies. The paper analyses the explanatory power of the proposed CCCTB formula on the data sample of group companies with a link to the Czech Republic - either parent or subsidiary company in the group covered in dataset is tax resident of the Czech Republic. The obtained results are evaluated on the level of individual economic sector with the aim to verify if the proposed CCCTB formula is the most suitable for them, where the sufficiency of the explanatory power of the allocation formula was indicated based on the assigned change of distributed profit to the respective economic sector.

Keywords: common consolidated corporate tax base, formula apportionment, NACE sectors, profit
JEL classification: F23, H25, K34

Published: August 1, 2018  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Krchnivá, K., & Nerudová, D. (2018). The CCCTB Allocation Formula Game: The Performance of Economics Sectors. Prague Economic Papers27(4), 427-448. doi: 10.18267/j.pep.660
Download citation

References

  1. Agundez-Garcia, A. (2006). The Delineation and Apportionment of an EU Consolidated Tax Base for Multi-Jurisdictional Corporate Income Taxation: a Review of Issues and Options. Working Paper (European Commission Taxation Papers). [Retrieved: 2016-26-2] Available at: http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_09_complete_en.pdf
  2. Anand, B., Sansing, R. (2000). The Weighting Game: Formula Apportionment as an Instrument of Public Policy. National Tax Journal, 53(2), 183-199, https://doi.org/10.17310/ntj.2000.2.01, [Retrieved: 2016-26-2] Available at: http://www.ntanet.org/NTJ/53/2/ntj-v53n02p183-200-weighting-game-formula-apportionment.pdf Go to original source...
  3. Cline, R., Neubig, T. et al. (2010). Study on the Economic and Budgetary Impact of the Introduction of a Common Consolidated Corporate Tax Base in the European Union. Commissioned by the Irish Department of Finance. [Retrieved: 2016-26-2] Available at: http://taxpolicy.gov.ie/wp-content/uploads/2011/06/EY-Report-CCCTB-for-Commissioner-Semeta-4-Jan-2011.pdf
  4. Eggert, W., Schjelderup, G. (2003). Symmetric Tax Competition under Formula Apportionment. Journal of Public Economic Theory, 5(2), 439-446, https://doi.org/10.1111/1467-9779.00141 Go to original source...
  5. European Commission. (2011). Proposal for A Council Directive on a Common Consolidated Corporate Tax Base (CCCTB). Brussels. Com (2011) 121/4. 2011/0058 (CNS).
  6. Gerard, M., Weiner, J. M. (2003). Cross-Border Loss Offset and Formulary Apportionment: How Do They Affect Multijurisdictional Firm Investment Spending and Interjurisdictional Tax Competition? CESifo. Working Paper No. 1004. [Retrieved: 2016-26-2] Available at: https://www.uclouvain.be/cps/ucl/doc/iag/documents/WP_97_Gerard.pdf
  7. Gordon, R., Wilson, J. (1986). An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment. Econometrica, 54(6), 1357-1373, https://doi.org/10.2307/1914303 Go to original source...
  8. Kolmar, M., Wagener, A. (2007). The Competiton with Formula Apportionment: The Interaction between Tax Base and Sharing Mechanism. CESifo. Working Paper No. 2097. [Retrieved: 2016-26-2] Available at: https://www.cesifo-group.de/portal/pls/portal/!PORTAL.wwpob_page.show?_docname=947932.PDF
  9. Krchnivá, K. (2015). The Czech Evidence for the Explanatory Power of Formula Factors on Profitability. Ekonomická revue - Central European Review of Economic, 18, 131-138.
  10. Krchnivá, K., Nerudová, D. (2015). The Influence of Allocation Formula on Generation of Profit in Different Economy Sectors. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 63(6), 1961-1967, https://doi.org/10.11118/201563061961 Go to original source...
  11. McLure, C. E. (1980). The State Corporate Income Tax: Lambs in Wolves' Clothing, in Aaron, A. J., Boskin, M. J., eds., The Economics of Taxation. Washington, DC: The Brookings Institution, 327-336.
  12. Nielsen, S. B., Raimondos-Møller, P., Schjelderup, G. (2001). Tax Spillovers under Separate Accounting and Formula Apportionment. Institute of Economics, University of Copenhagen. EPRU Working Paper No. 2001-07. [Retrieved: 2016-26-2] Available at: http://openarchive.cbs.dk/bitstream/handle/10398/7645/web-blaa-2001-07.pdf?sequence=1
  13. Nerudová, D., Solilová V. (2014). Missing Data and its Impact on the CCCTB Determination. 17th International Conference Enterprise and Competitive Environment 2014. Book Series: Procedia Economics and Finance. 12, 462-471. Go to original source...
  14. Nerudová, D., Solilová V. (2015). The Impact of the CCCTB Introduction on the Distribution of the Group Tax Bases across the EU: The Study for the Czech Republic. Prague Economic Papers, 24(6), https://doi.org/10.18267/j.pep.514 Go to original source...
  15. Nerudová, D., Solilová, V., Bohušová, H., Svoboda, P. (2015). Dopady zavedení CCCTB na rozpočet Česke republiky. (The budgetary impact of the introduction of the CCCTB in the Czech Republic). Prague: Wolters Kluwer, a. s., ISBN 978-80-7478-954-0.
  16. Pethig, R., Wagener, A. (2003). Profit Tax Competition and Formula Apportionment. CESifo. Working Paper No. 1011. University of Munich. [Retrieved: 2016-26-2] Available at: ftp://ftp.repec.org/opt/ReDIF/RePEc/sie/papers/106-03.pdf
  17. Riedel, N., Runkel, M. (2006). Company Tax Reform with a Water's Edge. Department of Economics, University of Munich. [Retrieved: 2016-26-2] Available at: http://ftp.zew.de/pub/zew-docs/sw_2006/papers/riedel_zew_summerworkshop2006.pdf
  18. Roggeman, A., Varleyen, I., Van Cauwenberge P., Coppens C. (2012). An Empirical Investigation into the Design of an EU Apportionment Formula Related to Profit Generating Factors. Transformations in Business & Economics, Vol. 11, No 3(27), 36-56. ISSN 1648-4460.
  19. Runkel, M., Schjelderup, G. (2007). The Choice of Apportionment Factors under Formula Apportionment. CESifo. Working Paper No. 2072. [Retrieved: 2016-26-2] Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1005578
  20. Tan, J. H. D. (2010). Unitary Formulary Apportionment as a Solution to the Conundrum of Source. [Retrieved: 2016-26-2] Available at: http://www.jmls.edu/academics/taxeb/pdf/ Faherty_1.pdf
  21. U.S. Congress, House Committee on the Judiciary, State Taxation of Interstate Commerce: Report of the Special Subcommittee on State Taxation of Interstate Commerce (The Willis Report), 4 (1, 2): 88th Cong., 2d Sess., June 15, 1964, H. Rep. 1480; Vol. 3 89th Cong., 1st Sess., June 30, 1965, H. Rept. 565; Vol. 4: 89th Cong., 1st Sess., Sept. 2, 1965, H. Rept. 952
  22. Weiner, J. M. (2005). Formulary Apportionment and Group Taxation in the European Union: Insights from the United States and Canada. Working Paper No. 8/2005. ISBN 92-894-6090-3. [Retrieved: 2016-26-2] Available at: http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/2004_2073_en_web_final_version.pdf
  23. Weiner, J. M. (1999). Using the Experience in the U.S. States to Evaluate Issues in Implementing Formula Apportionment at the International Level. OTA Paper 83. [Retrieved: 2016-26-2] Available at: https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/OTA-WP-83.pdf

This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.