1. 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
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2. Compulsory participation
The impact of consolidation + apportionment on the tax base/tax revenues
Compulsory participation
Fuest/Hemmelgarn/Ramb
(3 factors)
Devereux/Loretz
(turnover)
(assets)
Oestreicher/Koch
Austria
+112 -6 -0
-14
Belgium
-41
+14 -3 -1
France
-31 +5 -4 -2
Germany
-17
-11 -7
Hungary
n.a.
+10
Ireland
-50 -9
Italy
-26 +3
Spain
-16
+31
+30
Poland +9
The Netherlands
-74 +1 -8
-12
United Kingdom
+17 -5
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3. Optional participation
The impact of consolidation + apportionment on the tax base/tax revenues
Optional participation
Devereux/Loretz
(3 factors)
Oestreicher/Koch
Austria -5 -9
Belgium -7
France -2
Germany -3
Hungary
+19 -6
Ireland +0
Italy -4
Spain -1
Poland +3
The Netherlands -0
United Kingdom +8
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4. 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”
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5. The impact of a CCCTB on welfare, GDP and CIT revenues
Austria
0.02
-0.09
0.04
Belgium/Luxembourg
0.37
0.54
-0.19
France
-0.11
-0.18
0.01
Germany
0.12
0.82
-0.56
Hungary
0.22
0.17
-0.17
Ireland
0.06
-0.55
-0.37
Italy
-0.33
-0.70
0.25
Poland
0.23
0.13
Spain
-0.02
The Netherlands
0.21
0.36
-0.26
United Kingdom
0.18
0.16
-0.14
Source: Van der Horst/Bettendorf/Rojas-Romagosa
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6. 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!”
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7. “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?
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8. 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
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9. Has it? 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?
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