The Relevance of Depreciation Allowances as a Fiscal Policy Instrument: A Hybrid Approach to CCCTB?

Kunka Petkova, Alfons, J. Weichenrieder

Publikation: Working/Discussion PaperWU Working Paper

Abstract

A major goal of the EU Commission in the area of direct taxation is the introduction of a common consolidated corporate tax base (CCCTB) 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.
OriginalspracheEnglisch
ErscheinungsortVienna
HerausgeberWU Vienna University of Economics and Business
PublikationsstatusVeröffentlicht - 7 Sep. 2018

Publikationsreihe

NameWU International Taxation Research Paper Series
Nr.2018-07

WU Working Paper Reihe

  • WU International Taxation Research Paper Series

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