Decline of CFC rules and rise of IP boxes : how the ECJ affects tax competition and economic distortions in Europe


Bräutigam, Rainer ; Spengel, Christoph ; Streif, Frank


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URL: https://ub-madoc.bib.uni-mannheim.de/39677
URN: urn:nbn:de:bsz:180-madoc-396778
Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: ZEW Discussion Papers
Volume: 15-055
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H21 , K10,
Keywords (English): European Court of Justice , tax neutrality , effective tax rates , controlled foreign company rules , intellectual property boxes
Abstract: The European Court of Justice (ECJ) has become an influential player in the field of direct taxation in the European Union in the past twenty years. However, it is unclear whether the ECJ’s decisions actually increase tax neutrality and therefore contribute to the achievement of an internal market as stipulated by the European treaties or not. In 2006, the ECJ limited the applicability of specific tax rules in Europe that are intended to prohibit the excessive use of low-tax countries. Our counterfactual scenarios show that this restriction of so-called controlled foreign company (CFC) rules and the related emergence of IP boxes cast doubt on the positive effects the ECJ is assumed to have. Additionally, we show that the abolishment of IP boxes would strengthen tax neutrality in Europe. Overall, further research is needed to relate and harmonise economic and legal concepts of tax neutrality.

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Bräutigam, Rainer ; Spengel, Christoph ; Streif, Frank (2015) Decline of CFC rules and rise of IP boxes : how the ECJ affects tax competition and economic distortions in Europe. Open Access ZEW Discussion Papers Mannheim 15-055 [Working paper]
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