Journal Article

An applied analysis of ACE and CBIT reforms in the EU

de Mooij, Ruud A., Devereux, Michael P.

2011

Overview

We assess the quantitative impact of two reforms to corporation tax, which would eliminate the differential treatment of debt and equity: the allowance for corporate equity (ACE) and the comprehensive business income tax (CBIT). We explore the impact of these reforms on various decision margins, using an applied general equilibrium model for the EU calibrated with recent empirical estimates of elasticities. The results suggest that, if governments adjust statutory corporate tax rates to balance their budget, profit shifting and discrete location render CBIT more attractive for most individual European countries. European coordination makes a joint ACE more, and a joint CBIT less efficient. A combination of ACE and CBIT is always welfare improving.

• Publisher: Springer US,Springer,Springer Nature B.V
• Subject: ACE / Allgemeines Gleichgewicht / Business income / Business Taxation/Tax Law / Cash-Flow-Steuer / CBIT / CGE model / Coordination / Corporate tax reform / Corporate taxation / Corporate taxes / D58 / Economic rent / Economics / Economics and Finance / Equilibrium / Equity / EU-Staaten / EU-Steuerrecht / Europe / European Monetary Union / European Union / H25 / Income taxes / International / Körperschaftsteuer / Optimal taxation / Public Finance / Reforms / Risk premiums / Studies / Tax base / Tax coordination / Tax rates / Tax reform / Tax revenues / Tax rules / Tax systems / Taxation / Welfare / Wohlfahrtsanalyse