Discussant Ana AGUNDEZ GARCIA * *The views expressed here are those of the discussant and do not represent those o

1. The impact and Design of Business Taxation in a Globalised WorldLondon April 27 2009“Corporate Tax Consolidation and Enhanced Cooperation in the EU”L. Bettendorf, A. van der Horst, R. de Mooij and H. Vrijburg Discussant Ana AGUNDEZ GARCIA* *The views expressed here are those of the discussant and do not represent those of the European Commission ETPF Conference

2. Paper’s objectives: • Analysing effects of CCCTB when introduced by a sub-group of EU MS under Enhanced Cooperation Agreements (ECA) • Very interesting area of research: - theoretical literature: theory of cooperative games, coalition formation, etc. (Burbidge et al (1997), Beaudry et al (2000), Bordignon and Brusca (2006), etc) - Applied research: here application of CORTAX, “state of the art” model for corporate tax in the EU… room for improving modelling? ETPF Conference

3. Main elements of the mechanism of Enhanced Cooperation (EC, Title VII of the Treaty) • EC is a last resort mechanism • Minimum threshold of participating MS: 8 • Requires authorisation by qualified majority in Council (but no veto rights) • All MS may participate in deliberations but only participating MS vote to adopt decisions • Principle of openness: open to all MS at any time. Falicitate participation by as many MS as possible. • Aims at reinforcing the process on integration within the EU (and not undermine Single market, trade, competition, etc) ETPF Conference

4. Elements of this institutional framework in the study? * Paper assumes exogenously given coalitions and an exogenously given policy: the same policy in principle applicable to the EU-27…but NOT necessarily so!! Participating MS decide on the policy they are going to apply, which may be different to that proposed EU-wide. Implications for the model: eg. assume that ECA-common tax base = average tax base of participating countries (rather than EU-27 average) * The dynamics of enhanced cooperation: EC is an instrument of “progressive integration”. Paper should analyse further possible developments in the long/term, further countries joining, etc. ETPF Conference

5. Other comments on the choices made on CORTAX in this paper (I) • Preferable to use corporate tax rates as compensation mechanism: changes in statutory tax rate and EATR more interesting to analyse profit shifting and location decisions effects. • Extended version of CORTAX, including tax havens and location decisions: better framework to study the possibilities for CCCTB policy to be successful for implementing countries vis-à-vis the rest of the world • Reduction of compliance costs under CCCTB: calibration should be adjusted to the number of participating countries because the perimeter of consolidation/ALP changes. ETPF Conference

6. Other comments on the choices made on CORTAX in this paper (II) • Loss consolidation: - Broader definition of the common tax base in the first place, so that the “net tax base” (after loss compensation) ≈ current EU average (or participating MS’) - Gerard and Weiner (2006): “…apportionment provides governments with an insurance or risk-sharing mechanism against revenue loses in case of a bad state of nature (i.e. losses) on its territory” With FA: all jurisdictions get positive shares of tax bases…Implications for the “geographical distribution” of losses in the calibration? ETPF Conference

7. Other comments on the choices made on CORTAX in this paper (III) • Sales by Destination!! - ex-ante effects: distribution to place of consumption rather than place of production - ex-post effects: demand is less “manipulable” by firms than other factors Instead, Sales by Origin (Turnover) duplicates the weight of capital and labour in apportionment (specially of the later) ETPF Conference

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