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Corporate Tax Consolidation and Enhanced Cooperation in the European Union *
Author(s) -
Bettendorf Leon,
Van Der Horst Albert,
De Mooij Ruud A.,
Vrijburg Hendrik
Publication year - 2010
Publication title -
fiscal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 40
eISSN - 1475-5890
pISSN - 0143-5671
DOI - 10.1111/j.1475-5890.2010.00121.x
Subject(s) - consolidation (business) , multinational corporation , economics , welfare , european union , international economics , apportionment , yield (engineering) , international trade , public economics , market economy , accounting , finance , political science , materials science , law , metallurgy
We assess the economic impact of introducing consolidation with formula apportionment in the European Union and consider alternative enhanced cooperation agreements. We find that the consolidation is likely to yield a small aggregate welfare gain in Europe. However, not all countries benefit. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection which destroys the possibility of cooperation. We find that a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a Europe‐wide reform.