Corporate Tax Consolidation and Enhanced Cooperation in the European Union

This article assesses the economic implications of the introduction of consolidati-on with formula apportionment in the European Union under alternative enhanced cooperation agreements. We find that the consolidation is likely to yield a small aggre-gate welfare gain in Europe, but that not all countries benefit. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection which distroys the possibility of cooperation. We find that a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a European-wide reform