Company Tax Reform in the European Union: Guidance from the by Joann Martens-Weiner

By Joann Martens-Weiner

The ecu fee provided a method that might enable ecu businesses to compute their ecu tax base less than a unmarried set of tax principles on the ecu point and use a standard formulation to distribute this tax base around the person Member States. corporation Tax Reform and Formulary Apportionment within the ecu Union offers vast information for the european in shaping a method of consolidated base taxation with formulary apportionment. It evaluates how the U.S. states and Canadian provinces have resolved the commercial, political, and technical facets of the formulary apportionment approach. The e-book discusses the panorama for corporation tax reform within the ecu Union and illustrates how formulary apportionment may distribute the tax base around the Member States. It offers sensible info on the best way to layout an apportionment formulation and discusses chosen compliance and administrative matters. It analyzes how formulary apportionment may possibly have an effect on funding, employment, tax sales, and tax pageant within the eu Union.

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Extra resources for Company Tax Reform in the European Union: Guidance from the United States and Canada on Implementing Formulary Apportionment in the EU

Sample text

Illustration of cross-border income shifting (1) No profit shifting. Irish manufacturing company sells goods to independent distributors in the United Kingdom. (figures are in f 000) Irish manufacturing company Sales Cost of materials Cost of manufacture Independent British distributor £50,000 (10,000) (20,000) Sales f 100,000 Cost of sales Gross profit 20,000 Gross profit Administration Pre-tax profit (5,000) 15,000 Distribution Administration Pre-tax profit Tax (10%) (1,500) -- Tax (30%) Profit after tax 13,500 Profit after tax (50,000) 50,000 (35,000) (5,000) 10,000 (3,000) 7,000 (2) Profit shifting.

See Inland Revenue (2005). would continue to represent the "independent entity" outcome. However, if the subsidiary no longer operates as an independent entity, then its objective now forms part of the multinational's overall objective of maximizing the group's profits, rather than its separate entity profits. The outcome in scenario (2) no 24 Company Tax Reform in the European Union longer represents the outcome independent entities would have reached since the independent British distributor had £7,000 after-tax profits, but the controlled distributor has just £1,400 after-tax profits.

The lower the tax rate, the lower the benefit to transfer pricing manipulation. 10. If the home country exempts foreign-source income, a multinational company always has an incentive to shift income to the low tax jurisdiction. If the home country applies a foreign tax credit system, then the incentive depends on the company's foreign tax credit position and the ability to defer home country taxes. Since the EU plans to limit the new tax system to the EU's territorial boundaries, it will need to address the incentive to shift income out of the EU.

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