European Commission /
Taxation and Customs Union
What does “game theory” tell Finance
Ministers on whether they should support a
Common Consolidated Corporate Tax Base
(CCCTB)?
A short response to the paper by Jack Mintz
and Joann M. Weiner
Matthias Mors
European Commission
NYU Symposium on EC Tax Policy
14 March 2008
29/06/2016
1
European Commission /
Taxation and Customs Union
The impact of consolidation +
apportionment on the tax base/tax revenues
Compulsory participation
Austria
Belgium
France
Germany
Hungary
Ireland
Italy
Spain
Poland
The
Netherlands
United
Kingdom
29/06/2016
Fuest/Hemmelgarn
/Ramb
(3 factors)
Devereux/Loretz
(turnover)
Devereux/Loretz
(assets)
Oestreicher/Koch
(3 factors)
+112
-41
-31
-17
n.a.
-50
-26
-16
n.a.
-74
-6
+14
+5
-2
+10
-9
-0
+31
-1
+1
-0
-3
-4
-11
+14
-11
-2
+30
+9
-8
-14
-1
-2
-7
-14
-14
+3
-4
-3
-12
-8
+3
+17
-5
2
European Commission /
Taxation and Customs Union
The impact of consolidation +
apportionment on the tax base/tax revenues
Optional participation
Austria
Belgium
France
Germany
Hungary
Ireland
Italy
Spain
Poland
The Netherlands
United Kingdom
29/06/2016
Devereux/Loretz
(3 factors)
Oestreicher/Koch
(3 factors)
-5
-7
-2
-3
+19
+0
-6
-1
+3
-0
+8
-9
-9
-7
-9
-6
-5
-4
-4
-5
-5
-1
3
European Commission /
Taxation and Customs Union
Tentative conclusions on the tax base/tax
revenues
• It is not straightforward to determine who
“wins” and who “loses” in the CCCTB game
• Even studies using similar datasets (financial
accounts) arrive at times at different
conclusions in terms of tax base/revenues
• None of the studies manages to simulate
“sales by destination”
The economist’s advice:
• Tax base/revenues are in any event not the
right yardstick. One has to look at “welfare”
29/06/2016
4
European Commission /
Taxation and Customs Union
The impact of a CCCTB on
welfare, GDP and CIT revenues
Welfare
0.02
0.37
GDP
-0.09
0.54
CIT revenues
0.04
-0.19
The Netherlands
-0.11
0.12
0.22
0.06
-0.33
0.23
-0.02
0.21
-0.18
0.82
0.17
-0.55
-0.70
0.13
-0.09
0.36
0.01
-0.56
-0.17
-0.37
0.25
-0.70
0.06
-0.26
United Kingdom
0.18
0.16
-0.14
Austria
Belgium/Luxembourg
France
Germany
Hungary
Ireland
Italy
Poland
Spain
Source: Van der Horst/Bettendorf/Rojas-Romagosa
29/06/2016
5
European Commission /
Taxation and Customs Union
The economists’ advice:
• A stable coalition can emerge if the “winners”
compensate the “losers”
Implication:
• Those Member states losing CIT tax revenues
through the introduction of a CCCTB should
pay side-payments to those with rising tax
revenues as the former see their welfare
increase
The normal Finance Minister’s likely response:
“Would the economists please leave my office!”
29/06/2016
6
European Commission /
Taxation and Customs Union
“Game over”?
Not quite. The Minister still does not know
whether to support the CCCTB or not!
Can the Minister’s civil servants provide any
guidance?
29/06/2016
7
European Commission /
Taxation and Customs Union
Not really:
•They do not have the (tax) data required to
calculate even the static effects of a CCCTB
•They don’t know how the CCCTB will affect tax
competition as there are no studies assessing
the mobility of the actual apportionment factors
•Even if the numerical results would look
acceptable, they don’t know whether they can
trust all other Member States in administering
the system
29/06/2016
8
European Commission /
Taxation and Customs Union
Conclusion?
Mintz/Weiner, page 30:
“… this paper has shown that it is possible for
the EU to reach a negotiated agreement that
is satisfactory to all players in the ‘EU tax
cooperation’ game.”
Has it?
29/06/2016
9