IDEAS home Printed from https://ideas.repec.org/a/kap/empiri/v47y2020i3d10.1007_s10663-019-09441-w.html
   My bibliography  Save this article

The relevance of depreciation allowances as a fiscal policy instrument: A hybrid approach to CCCTB?

Author

Listed:
  • Kunka Petkova

    (Vienna University of Economics and Business)

  • Alfons J. Weichenrieder

    (Goethe University Frankfurt, Vienna University of Economics and Business & CESifo)

Abstract

A major goal of the EU Commission in the area of direct taxation is the introduction of a common consolidated corporate tax base in Europe. While hardly discussed in the literature, such a system would limit national discretion over tax depreciation. In a sample of up to 47 countries, we find that the probability of a tax reform that improves the depreciation allowances increases, if the macroeconomic situation is weak. This suggests that changes in depreciation allowances are used as a fiscal instrument for stabilization. A common consolidated tax base deprives national governments from implementing investment incentives via accelerated depreciation. This paper discusses the possible implementation of a hybrid system that combines features of formula apportionment and separate accounting. Such a hybrid system may substantially mitigate transfer pricing problems and other tax planning issues, whilst preserving national discretion over depreciation allowances.

Suggested Citation

  • Kunka Petkova & Alfons J. Weichenrieder, 2020. "The relevance of depreciation allowances as a fiscal policy instrument: A hybrid approach to CCCTB?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(3), pages 579-610, August.
    • Handle: RePEc:kap:empiri:v:47:y:2020:i:3:d:10.1007_s10663-019-09441-w
    DOI: 10.1007/s10663-019-09441-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10663-019-09441-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10663-019-09441-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hines Jr., James R., 2010. "Income misattribution under formula apportionment," European Economic Review, Elsevier, vol. 54(1), pages 108-120, January.
    2. Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2207-2223, September.
    3. Rüdiger Pethig & Andreas Wagener, 2007. "Profit tax competition and formula apportionment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(6), pages 631-655, December.
    4. Jana Kremer & Martin Ruf, 2008. "Belastung der Kapitalgesellschaften nach der Unternehmensteuerreform 2008," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 88(1), pages 64-72, January.
    5. Alesina, Alberto & Favero, Carlo & Giavazzi, Francesco, 2015. "The output effect of fiscal consolidation plans," Journal of International Economics, Elsevier, vol. 96(S1), pages 19-42.
    6. Leon Bettendorf & Michael P. Devereux & Albert Van Der Horst & Simon Loretz & Ruud A. de Mooij, 2010. "Corporate tax harmonization in the EU [Taxing corporate income]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(63), pages 537-590.
    7. Hines, James R. Jr., 1999. "Lessons From Behavioral Responses to International Taxation," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 305-322, June.
    8. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    9. Dirk Kiesewetter & Tobias Steigenberger & Matthias Stier, 2018. "Can formula apportionment really prevent multinational enterprises from profit shifting? The role of asset valuation, intragroup debt, and leases," Journal of Business Economics, Springer, vol. 88(9), pages 1029-1060, December.
    10. Peter Egger & Horst Raff, 2015. "Tax rate and tax base competition for foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(5), pages 777-810, October.
    11. Mintz, Jack & Weiner, Joann Martens, 2003. "Exploring Formula Allocation for the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 695-711, November.
    12. Kari, Seppo & Laitila, Jussi & Ropponen, Olli, 2018. "Investment Incentives and Tax Competition under the Allowance for Growth and Investment (AGI)," Working Papers 110, VATT Institute for Economic Research.
    13. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
    14. Mintz, Jack M. & Weichenrieder, Alfons J., 2010. "The Indirect Side of Direct Investment: Multinational Company Finance and Taxation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262014491, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Estian Calitz & Eva Muwanga-Zake & Alexius Sithole & Wynnona Steyn, 2021. "Depreciation allowances in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 45(1), pages 1-22, January.
    2. Alina Zh. Sakun & Kateryna A. Pylypenko & Svitlana V. Skrypnyk & Oleksandr S. Prystemskyi & Inesa V. Shepel, 2022. "Accounting and analytical space of providing the depreciation policy of Ukrainian enterprises," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 0(2), pages 247-270.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eichner, Thomas & Runkel, Marco, 2009. "Corporate income taxation of multinationals and unemployment," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 610-620, September.
    2. Gaëtan Nicodème, 2006. "Corporate tax competition and coordination in the European Union: What do we know? Where do we stand?," European Economy - Economic Papers 2008 - 2015 250, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Keller, Sara & Schanz, Deborah, 2013. "Measuring tax attractiveness across countries," arqus Discussion Papers in Quantitative Tax Research 143, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Peralta, Susana & Wauthy, Xavier & van Ypersele, Tanguy, 2006. "Should countries control international profit shifting?," Journal of International Economics, Elsevier, vol. 68(1), pages 24-37, January.
    5. Krautheim, Sebastian & Schmidt-Eisenlohr, Tim, 2011. "Heterogeneous firms, 'profit shifting' FDI and international tax competition," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 122-133, February.
    6. Hines Jr., James R., 2010. "Income misattribution under formula apportionment," European Economic Review, Elsevier, vol. 54(1), pages 108-120, January.
    7. Vincent Bouvatier & Gunther Capelle-Blancard & Anne-Laure Delatte, 2017. "Banks Defy Gravity in Tax Havens," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03101505, HAL.
    8. Theresa Lohse & Nadine Riedel, 2013. "Do transfer pricing laws limit international income shifting? Evidence from European multinationals," Working Papers 1307, Oxford University Centre for Business Taxation.
    9. AMERIGHI, Oscar, 2004. "Transfer pricing and enforcement policy in oligopolistic markets," LIDAM Discussion Papers CORE 2004069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Huizinga, Harry & Laeven, Luc, 2008. "International profit shifting within multinationals: A multi-country perspective," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1164-1182, June.
    11. Huizinga, Harry & Laeven, Luc, 2007. "International Profit Shifting within European Multinationals," CEPR Discussion Papers 6048, C.E.P.R. Discussion Papers.
    12. Martini, Jan-Thomas & Niemann, Rainer & Simons, Dirk, 2014. "Management incentives under formula apportionment: Tax-induced distortions of effort and compensation in a principal-agent setting," arqus Discussion Papers in Quantitative Tax Research 168, arqus - Arbeitskreis Quantitative Steuerlehre.
    13. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2004. "Economic Effects of Regional Tax Havens," NBER Working Papers 10806, National Bureau of Economic Research, Inc.
    14. Thiess Büttner & Georg Wamser, 2007. "Intercompany Loans and Profit Shifting – Evidence from Company-Level Data," CESifo Working Paper Series 1959, CESifo.
    15. Anca D. Cristea & Daniel X. Nguyen, 2016. "Transfer Pricing by Multinational Firms: New Evidence from Foreign Firm Ownerships," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 170-202, August.
    16. Rainer Niemann & Ulrich Schreiber, 2020. "Herausforderungen und Entwicklungsperspektiven des Steuersystems [Challenges and Development Perspectives of the Tax System]," Schmalenbach Journal of Business Research, Springer, vol. 72(1), pages 1-48, March.
    17. Aleksandra Riedl & Silvia Rocha-Akis, 2007. "Testing the tax competition theory: How elastic are national tax bases in western Europe?," Department of Economics Working Papers wuwp112, Vienna University of Economics and Business, Department of Economics.
    18. Jean Hindriks & Susana Peralta & Shlomo Weber, 2014. "Local Taxation of Global Corporation: A Simple Solution," Annals of Economics and Statistics, GENES, issue 113-114, pages 37-65.
    19. Makoto Hasegawa, 2023. "Territorial Tax Reform and Profit Shifting by US and Japanese Multinationals," National Tax Journal, University of Chicago Press, vol. 76(4), pages 771-804.
    20. Maximilian Todtenhaupt & Johannes Voget, 2021. "International Taxation and Productivity Effects of M&As," CESifo Working Paper Series 8967, CESifo.

    More about this item

    Keywords

    CCCTB; Corporate taxation; Investment incentives; Macro fiscal policy;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:empiri:v:47:y:2020:i:3:d:10.1007_s10663-019-09441-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.