Work

An applied analysis of ACE and CBIT reforms in the EU

Year: 2010

Type: article

Abstract: We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT). We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical estimates of elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less efficient. A combination of ACE and CBIT is always welfare improving.

Source: International Tax and Public Finance

DOI: 10.1007/s10797-010-9138-8

Authors: Ruud A. de Mooij, Michael P. Devereux

Institutions: Erasmus University Rotterdam, University of Oxford

Language: English

Topic: Corporate Taxation and Avoidance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,090

Funders: University of Oxford, European Commission, Economic and Social Research Council