The Impact of the Common Consolidated Corporate Tax Base on Austria

The current system of international corporate taxation foresees separate taxation of profit of multinational companies in each country they are active in. This leads to high compliance cost for companies and tax authority and implies possibilities for international profit shifting. To combat these issues the European Commission has relaunched the proposal for a common consolidated corporate tax base (CCCTB). According to this proposal the multinational companies shall calculate their EU-wide tax base according to common rules. In a second step these tax bases are consolidated and apportioned to the member countries according to a common formula (formula apportionment). This study evaluates the implications of this proposal on the fiscal situation in Austria. The comparison between the harmonised tax base and the current laws in Austria suggests that the static fiscal implications would be small. The consolidation and formula apportionment would likely lead to a moderate reduction in the tax revenues in Austria. The second part of the study deals with the long-run implications of the CCCTB proposal and evaluates the changed incentives for companies and tax competition. The introduction of the CCCTB would not fully eliminate tax competition, but rather substantially change its nature. Inside the scope the competition shifts from profits to apportionment formulas. One possibility to limit this competition would be EU-wide binding minimum tax rates.