CCCTB, Enhanced Cooperation Agreement and non-participating countries (tentative and incomplete draft)

Gérard, Marcel
(2008) National Tax Association 101st Annual Meeting — Location: Philadelphia (20.November.2008)

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Authors
  • Gérard, MarcelUCLouvain
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Abstract
In this paper we investigate the feasibility of the CCCTB project in a context where only some EU Member States adopt that project, in the framework of an Enhanced Cooperation Agreement. To cope with that issue we use a three-country tax competition model. Two among those countries are places where it is possible for the multinational enterprise to locate a production entity and to have a market; the third one is just a place where financial activities might be located. We first imagine CCCTB adopted by the three countries; using the concepts of coalition theory, we call that "the great coalition". Then we assume that only a sub-coalition - only two among the three countries - consider adopting the CCCTB proposal. Actually they will only adopt the reform if their welfare gain is positive. Since the jurisdiction remaining outside the coalition can make that welfare gain negative - by offering an attractive place for the location of profits of the multinational through the use of financial detours -, we ask the question of the additional institutional features which eventually could make that gain positive; they imply protecting the common consolidated tax base. Such protection device may consist in the simultaneous adoption of another reform: a move from the exemption principle to the crediting principle possibly completed by anti-cfc measures. We also examine what differs if alternative designs for the apportionment formula are chosen.
Affiliations
  • Louvain School of ManagementAccounting & Finance

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Gérard, M. (2008). CCCTB, Enhanced Cooperation Agreement and non-participating countries (tentative and incomplete draft). National Tax Association 101st Annual Meeting, Philadelphia. https://hdl.handle.net/2078.5/249541