Grenzüberschreitender Gewinnausgleich und Steuerwettbewerb

Abstract

This study highlights the relevance of firm losses for tax revenues when countries switch from a system of separate accounting (SA) to a system of tax base consolidation with formula apportionment (FA). The results show that in the short run, neglecting behavioural responses of firms and governments, the cross-border loss offset inherent in formula apportionment clearly decreases tax revenues. In the medium run, with firms adjusting their strategies, tax revenues are still lower under formula apportionment assuming realistic values for firms' probability of incurring losses or the costs of profit shifting. However, in the long run, where both firms and governments adjust their behaviour, the picture changes. A switch from separate accounting to formula apportionment becomes beneficial in terms of tax revenues. In addition, the results show that a higher weight on input shares in the apportionment formula may mitigate tax competition and thus increase tax revenues. Input factors – contrary to output factors – provide a backstop against a shortfall of tax revenues if subsidiaries are loss making.