15th March, 2016, Praha
Danuše Nerudová
The impacts of CCCTB implementation on
the budget revenues of the Czech Republic
Aim
• to map current situation – i.e. situation of
applying separate entity approach
• to quantify the differences in situation when
CCCTB will be introduced – i.e. applying the
allocation formula for sharing the tax base
• to quantify budgetary impacts for the Czech
Rep. under different scenarios
page 2
Introduction
page 3
• EC has worked on CCCTB for more than 10
years
• CCCTB directive proposal on 16th March 2011
• fair tax competition
• elimination of TP problems
• decrease in compliance costs of taxation
• mechanism for sharing the tax base
Theoretical Background
• unitary approach vs separate accounting
• unitary approach – formulary apportionment
• separate accounting – subsidiary has to deal
with its parent at AL
• CCCTB – group taxation & consolidation →
sharing the tax base
page 4
page 5
Theoretical Background
• tax base sharing
→ formulary apportionment – macro factors
→ formulary apportionment – micro factors
• FA micro factors
→ VA approach
𝑇𝐵𝑖𝑉𝐴
= 𝐶𝑇𝐵
𝑉𝐴𝑖
× 100
𝑛
𝑖 𝑉𝐴𝑖
TB…tax base, CTB…consolidated tax base, VA…value aded, i…member of the
group
page 6
Theoretical Background
• FA micro factors
→ three equally weighted factors in USA
𝑃𝑖 = 𝑃𝑡
1 𝐶𝑖
3 𝐶𝑡
+
1 𝐿𝑖
3 𝐿𝑡
+
1 𝑆𝑖
3 𝑆𝑡
P…profit of the company, C….capital, L…labor, S…..sales
→ two equally weighted factors in Canada
𝑃𝑖 = 𝑃𝑡
1 𝐺𝐼𝑖 1 𝐿𝑖
+
2 𝐺𝐼𝑡 2 𝐿𝑡
P…profit of the company, GI…gross income, L…labor
Theoretical Background
• FA under CCCTB
1 𝑆 𝑥 1 1 𝑃𝐴 1 𝐸 𝑋
1 𝐴𝑋
𝑆ℎ𝑎𝑟𝑒𝑋 =
+
+
+
𝐺
𝐺
𝐺
3𝑆
3 2𝑃
2𝐸
3 𝐴𝐺
x…member of the CCCTB group
G…CCCTB group
S…sales
P...payroll
E…employees
A…assets
page 7
Review of the literature
• 4 studies researching the impact of CCCTB
introduction on budgets of EU MS
Fuest, Hemmelgarn and Ramb (2006)
- EU 15, 2 th. German parents, 6 th. foreign
subsidiaries, obligatory implementation
- 20 % decrease in German TB
- 74 % decrease in Dutch TB
- 112 % increase in Austrian TB
page 8
Review of the literature
page 9
Van der Horst, Betterndorf and Rojas-Ramagisa
(2007)
- EU 17, obligatory implementation, aimed at
welfare connected with implementation
- assumption – every parent has its subsidiary in
all EU 17; no cross-border loss offsetting
- 0.82 % increase in German TB
- 0.70 % decrease in Italian TB
Review of the literature
Devereux and Loretz (2008)
- two scenarios, 50 th. companies, EU 25,
50% rule for ownership, no special allocation
rules for special industries
- impact from -17 % to 60 %
page 10
Review of the literature
page 11
Cline, Neubig, Philips, Sanger and Walsh (2010)
- three scenarios, 200 th. companies, EU 27,
based on old CCCTB rules
- obligatory implementation – DK ↓8.3%,
DE ↑ 6.0%, CZ ↓ 3.0%
- voluntary implementation - DE ↓7.7%,
UK ↑ 2.6%, CZ ↓ 3.1%
- obligatory in Eurozone
NL ↓8.5%, FR ↑ 5.7%
Methodology
page 12
- Amadeus database
- Bankscope databse
- EU 28
- two tier test
- at least 50.01% ownership in the controlled company and
more than 75.01 % of the voting rights
- comparative analysis of national consolidation and group
taxation regimes (full consolidation, pooling, intra-group
loss transfer and no scheme available)
- calculation of the division of the group tax bases among
the EU Member States, where subsidiaries are situated
Methodology
- 2 764 parent comp. resident in CZ
- 2 440 subsidiaries of Czech parents
- missing data
→ regression
→ imputation
→ multiple imputation
→ multiple imputation with independent variables
- sensitivity analysis
page 13
Methodology
page 14
Methodology
page 15
Methodology
page 16
page 17
Methodology
Average deviation
Individual deviations**
Methods
Operating
revenue
No.
Employees
Payroll
Operating
revenue
No.
Employees
Payroll
Regression
4
4
4
-
-
-
Imputation (Im)
1
3
1
1
1
1
Multiple imputation (MI)
2
1
3
2
1
2
Multiple imputation (TMI)
3
2
2
3
1
3
1 – the best, 4 – the worst, based on data from NACE 46 only
Results – current situation
Country
ISO code
Parents EU
Absolutely
page 18
Two-tier test fulfillment
Subsidiaries EU
Relatively
Absolutely
Relatively
AT
2 293
1.4%
5 113
1.4%
BE
2 213
1.4%
6 069
1.6%
BG
2 252
1.4%
0
0.0%
CY
863
0.5%
1 982
0.5%
CZ
2 764
1.7%
6 210*
1.6%
DE
18 885
11.6%
48 726
12.9%
DK
13 687
8.4%
20 372
5.4%
EE
1 929
1.2%
3 259
0.9%
ES
7 436
4.6%
19 978
5.3%
FI
1 452
0.9%
4 047
1.1%
FR
12 883
7.9%
35 932
9.5%
GB
62 954
38.5%
147 965
39.2%
GR
496
0.3%
1 512
0.4%
HR
34
0.0%
0
0.0%
HU
38
0.0%
848
0.2%
IE
3 814
2.3%
7 438
2.0%
IT
15 518
9.5%
29 509
7.8%
LT
157
0.1%
742
0.2%
LU
682
0.4%
2 019
0.5%
LV
135
0.1%
543
0.1%
MT
58
0.0%
241
0.1%
NL
4 609
2.8%
14 139
3.7%
PL
2 447
1.5%
7 975
2.1%
PT
1 656
1.0%
3 805
1.0%
RO
1 084
0.7%
0
0.0%
SE
2 237
1.4%
7 979
2.1%
SI
186
0.1%
579
0.2%
SK
156
0.1%
799
0.2%
n.a.
483
0.3%
0
0%
163 401
100.0%
377 781
100.0%
TOTAL
Results – current situation
Subsidiaries of Czech Parents with the
information about P/L before taxation
AT
0
0.0%
BE
0
0.0%
BG
0
0.0%
CY
0
0.0%
CZ
2 358
96.6%
DE
7
0.3%
DK
0
0.0%
EE
1
0.0%
ES
1
0.0%
FI
0
0.0%
FR
1
0.0%
GB
0
0.0%
GR
0
0.0%
HR
0
0.0%
HU
1
0.0%
IE
0
0.0%
IT
3
0.1%
LT
0
0.0%
LU
0
0.0%
LV
0
0.0%
MT
0
0.0%
NL
2
0.1%
PL
19
0.8%
PT
0
0.0%
RO
0
0.0%
SE
0
0.0%
SI
1
0.0%
SK
46
1.9%
2 440
100.0%
TOTAL
page 19
Results – current situation
Full consolidation
Pooling of the result on the parent company
Intra-group loss transfer
Group taxation scheme not available
page 20
Netherlands
Denmark
Germany
Spain
France
Italy
Luxembourg
Austria
Poland
Portugal
Ireland
Cyprus
Malta
Lithuania
Latvia
Sweden
Finland
United Kingdom
Belgium
Bulgaria
Croatia
Czech republic
Greece
Hungary
Slovak Republic
Estonia
Romania
Slovenia
Results – current situation
page 21
Results – CCCTB implementation in EU28
page 22
Results – comparative analysis
-
Increase by 1.22% for CZ
Increase by 1.18 %for SK
Increase by 0.05% for ES
Decrease by 1.36% for Germany
Decrease for EE, HU and Poland
page 23
Results – CCCTB not implemented in CZ
page 24
Effective average tax rate in EU in 2014 (ZEW)
Country
AT
BE
BG
HR
CY
CZ
DK
EE
FI
FR
DE
EL
HU
IE
Corporate
tax rates in
%
25.0
34.0
10.0
20.0
12.5
19.0
24.5
21.0
20.0
38.9
31.0
26.0
20.9
12.5
Effective
average tax
rate in %
23.0
26.7
9.0
16.5
15.2
16.7
22.2
16.5
18.4
39.4
28.2
24.1
19.3
14.4
Country
IT
LV
LT
LU
MT
NL
PL
PT
RO
SK
SI
ES
SE
UK
Corporate
tax rates in
%
30.9
15.0
15.0
29.2
35.0
25.0
19.0
30.0
16.0
22.0
17.0
35.3
22.0
21.0
Effective
average tax
rate in %
24.0
14.3
13.6
25.5
32.2
22.6
17.5
27.1
14.8
19.4
15.5
32.6
19.4
22.4
Results – CCCTB not implemented in CZ
page 25
Tax bases and potential outflow
Database
Czech parent companies
No. of its
No. of
Total tax
subsidiaries
companies
bases of
in EU
subs. in
outoutCZ
total
total
flow
flow
Other EU parent companies
No. of its
No. of
Total tax
subsidiaries
companies
bases of
in CZ
subs. in
outoutCZ
total
Total
flow
flow
Amadeus
1,587
81
2,427
108
816
0
1,135
35
Banscope
10
6
49
33
EUR
1,655,877
th.
11
0
249
0
EUR
5,317,117
th.
Total
1,597
87
2,476
141
-
827
0
1,384
35
-
Results – CCCTB not implemented in CZ
TB of CZS** - first scenario
NACE1
current situation
page 26
TB of CZS* - second scenario
expected
outflow
B
0.04
2,179
-
-
0.47
7,836
0.00
-
1,918
C
23.08
1,227,361
15.76
7,730
6.66
110,250
1.84
14,873
55,993
D
0.00
142
-
-
14.82
245,368
0.00
0
174,696
E
0.11
6,291
0.04
19
0.78
12,955
0.80
6,494
218
F
0.69
36,940
-
-
0.52
8,565
0.00
0
13,467
G
0.96
50,989
0.57
283
20.61
341,386
25.46
205,221
539,736
H
0.50
26,470
-
-
1.27
21,084
0.00
-
0
I
0.00
41
-
-
0.11
1,813
0.00
-
-
2.43
129,007
0.03
14
2.69
44,540
0.19
1,555
206
871
37.55
205,203
71.53
162,136
657
414,574
1,746,359
K
2
K
3
36.19
594,105
1,330,038
1.77
0.10
0.00
0.07
J
7.41
in th.
EUR
-
A
%
in th.
EUR
1,663
expected
outflow
in th.
EUR
3,806
%
in th.
EUR
3,640
current situation
expected
outflow of
TB of
parent
companies
in th.
EUR
-
%
-
%
416,579
L
0.27
14,523
-
-
3.25
53,897
0.03
247
3,273
M
35.48
1,886,336
72.33
35,503
5.66
93,671
0.15
1,213
179,845
N
0.15
8,183
2.09
1,024
0.24
3,996
0.00
-
10
O
0.01
706
-
-
4.45
73,767
0.00
-
-
P
-
-
-
-
0.03
557
0.00
-
-
Q
-
-
-
-
0.14
2,376
0.00
-
-
R
-
-
-
-
0.63
10,347
0.00
-
-
-
-
-
-
0.00
25
0.00
-
-
100
5,317,117
100
49,084
100
1,655,877
100
806,313
2,716,378
48.69%
-
S
Suma
100%
0.92%
100%
Results – CCCTB not implemented in CZ
Database
Amadeus
and
Banscope
Czech parent companies
No. of its
No. of
subsidiaries in
companies
EU
Total TB in
th. EUR
outouttotal
total
flow
flow
1,597
87
2,476
141
1,655,877
Other EU parent companies
No. of its
No. of
subsidiaries in
companies
CZ
Total TB in
th. EUR
total
outtotal
outflow
flow
Amadeus
and
Banscope
Total
%
Corporate
tax
liability*
%
page 27
Expected outflow in th.
EUR
Czech
subsidiaries
Czech
parent
companies
806,313
2,716,378
Expected outflow in th.
EUR
Czech
subsidiaries
Czech
parent
companies
827
0
1,384
35
5,317,117
49,084
0
2,424
87
3,860
176
6,972,994
100
855,397
12.26
2,716,378
-
4,527,032**
162,525
516,112
100
3.59
11.40
Conclusions I
page 28
• Obligatory implementation in EU28
-
Increase by 1.22% for CZ
Increase by 1.18 %for SK
Increase by 0.05% for ES
Decrease by 1.36% for Germany
Decrease for EE, HU and Poland
• Implementation in EU except CZ
- Decrease in TTB by 12.26% - i.e. decrease in revenues
from CIT by 3. 59% in CZ
Action Plan July 2015
•
•
•
•
Re-launching of CCCTB
Instrument for combating tax avoidance
2 stage implementation
Interim period
page 29
page 30
Types of loss relief
Within one company
(“permanent establishment”)
Domestic loss relief
Cross-border loss relief
Automatically available in all
25 member states
Available in most cases
Belgium, Czech Republic,
Netherlands, Austria, Portugal,
Slovenia, Slovakia, Finland,
Sweden, United Kingdom,
Spain, Ireland, Italy, Cyprus,
Latvia, Lithuania, Malta
Within a group of companies
(“parent and subsidiary”)
Available under specific rules
in most member states
In principle not available,
with very few exceptions
Denmark, Germany, Spain,
France, Ireland, Italy, Cyprus,
Malta, Latvia, Luxembourg,
Netherlands, Austria, Poland,
Slovenia, Finland, Sweden,
United Kingdom
Denmark, France, Italy,
Austria
page 31
Cross-border loss relief
Member state
Method of cross-border relief
Denmark
System of consolidated profits
France
System of consolidated profits
Italy
System of consolidated profits
Austria
Deduction (Reintegration)
page 32
Alternatives
• Cross-border loss relief - alternatives
Tax year of loss
Deduction of loss in the year of loss
Subsequent
tax
Alternative 1
Alternative 2
years
definitive loss
temporary loss
transfer
transfer
future profits are
not taken into
account
recapture of
deducted loss
Alternative 3
current taxation of
the result of
subsidiary
taking into account
of results of lossmaking entity for a
certain period
page 33
Conclusions II
Sum of TB
NACE
No. of Parents
Subs in EU and their TB categorized according to NACE of Czech Parent in ths. EUR – CZ parents and EU Subs
No. of Subs
%
ths. EUR
A
39
42
0.09
1 663
BE
CZ
1 663
B
5
6
0.43
7 505
7 836
C
232
307
7.41
130 206
110 250
D
19
33
13.92
244 699
245 368
E
16
29
0.74
13 006
12 955
F
131
171
0.48
8 484
8 565
G
407
550
22.32
392 361
341 386
H
36
51
1.20
21 080
21 084
I
30
55
0.10
1 813
1 813
J
53
66
2.54
44 575
44 540
K1
25
170
37.18
653 576
L
224
359
3.07
M
283
495
5.35
4 292
DE
EE
11 481
4 005
3 996
4.20
73 767
73 767
SK
12
-1.943
471.5987
220
7 758
103
555.3724
46 203
35
93 671
0.23
SI
-3.61846
93 968
8
16
4 114
7
51
PL
-80.661
53 897
2
NL
51
53 965
41
IT
668.73
8
25 406
N
HU
-330.771
621 782
O
ES
-7419.78
12 669
-3 153
61
3
294
9
P
22
35
0.03
557
Q
16
22
0.14
2 376
2 376
R
11
19
0.59
10 347
10 347
S
5
7
0.00
25
100%
1 757 980
4 292
1 655 877
41 008
16
103
12
-2
-7 751
1 077
12 889
50 457
100%
0.2441
94.1920
2.3327
0.0009
0.0059
0.0007
-0.0001
- 0.4409
0.0613
0.7332
2.8702
Sum in ths. EUR
1 597
2 476
%
557
25
Conclusions II
• decrease by 0.7843 %
• i.e. by EUR 13 896 ths.
page 34
15th March 2016, Praha
Thank you for your attention !!
Danuše Nerudová
Department of Accounting and Taxes
[email protected]
www.mendelu.cz