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

Petkova, Kunka and Weichenrieder, Alfons, J. (2018) The Relevance of Depreciation Allowances as a Fiscal Policy Instrument: A Hybrid Approach to CCCTB? WU International Taxation Research Paper Series, 2018-07. WU Vienna University of Economics and Business, Universität Wien, Vienna.


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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.

Item Type: Paper
Additional Information: Financial support by the Austrian Science Fund (FWF): W1235-G16 is gratefully acknowledged. This research is also part of the research program of the LOEWE Center SAFE. Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: CCCTB, corporate taxation, investment incentives, macro fiscal policy
Classification Codes: JEL H2
Divisions: Departments > Finance, Accounting and Statistics
Depositing User: ePub Administrator
Date Deposited: 28 Sep 2018 09:03
Last Modified: 22 Oct 2019 00:41


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