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Kunka Petkova, Alfons J. Weichenrieder
The relevance of depreciation allowances as a fiscal policy instrument: A hybrid approach to CCCTB?
Empirica, 2020, 47(3), pp.579-610,
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.
Research group:Macroeconomics and European Economic Policy

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