Report on behavioural model for measurement of the impacts of tax sharing mechanism under C(C)CTB

The European Commission re-launches the CCCTB in Europe in its efforts to fight tax evasion and tax fraud via a two-step procedure. First, only a common corporate tax base (CCTB) would be implemented with the possibility of cross-border loss offsetting. A common consolidated corporate tax base (CCCTB) should be introduced only in the second step. The objective of this paper is to research the impact of both implementation steps on the amount of the tax bases allocated in all the EU Member States. We develop a behavioural model capturing the changes in the behaviour of the entities that can enter the C(C)CTB system voluntarily. The research revealed that in the group of large entities above the set threshold of EUR 750 mil. of consolidated turnover, which would be needed to enter the C(C)CTB system obligatorily, the implementation of CCTB would result in a decrease in the total tax base in the EU of 2.2% in comparison with the current situation; for CCCTB, the decrease would be 4.7%. In the dataset of SMEs under the assumption that all entities with existent cross-border losses would enter the CCTB system, the research revealed that it would result in a decrease in the total tax bases in the EU of 6.7% in comparison with the current situation. The impact of the CCCTB implementation in this dataset was quantified as the decrease in the total tax base in the EU of 46.0-58.6%. In the dataset of large entities not meeting the set threshold of EUR 750 mil. of consolidated turnover, the research revealed that assuming all entities with existing cross-border losses in this group would enter the CCTB system would result in a decrease in the total tax bases in the EU of 9.6% relative to the current situation. The impact of the CCCTB implementation in this dataset was quantified as a decrease in the total tax base in the EU of 16.43-26.79%