A major goal of the European Commission in the area of direct taxation is the introduction of a common consolidated corporate
tax base in Europe (CCCTB). 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 stabilisation. 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.
