The Impact of ICT on Profit Allocation within Multinational Groups: Arm's Length Pricing or Formula Apportionment?

The use of information and communication technologies (ICT) within multinational groups leads to a rising number of intragroup cross-border transactions. At the same time, transactions and the organisational structures of affiliated groups become more and more specific and, thus, less comparable. The importance of human capital and of mobile factors of production, such as intangible assets, increases. The objective of this paper is to give an insight into the principal issues of profit allocation within multinational groups resulting from these economic changes. It is examined whether the traditional transaction methods based on the arm?s length principle can be upheld and to what extent the alternative method of formula apportionment is more suitable. The tax principles of inter-nation equity and feasibility are used to evaluate the different methods of profit allocation. We conclude that, in the light of the two demanded principles, formula apportionment is more appropriate than the arm?s length principle as regards the changed economic structures by use of ICT. As formula apportionment constitutes a suitable alternative especially in the European Union, the proposals made by the European Commission are considered to be a good starting point. --International Company Taxation,Profit Allocation,Transfer Pricing,Arm?s Length Principle,Formula Apportionment,Inter-Nation Equity

Taxation, R&D tax incentives and patent application in Europe

The focus of this paper is on effects from tax incentives for research and development inputs (R&D) and corporate income tax on business R&D and patenting behaviour. First, we provide a theoretical discussion of tax planning with R&D and intellectual property (IP) ownership. Further, we employ firm-specific micro-data on patent applications of European corporations at the European Patent Office to test reactions on changes in R&D tax incentives and corporate tax burden. We find a positive impact of R&D tax incentives and a negative impact of the statutory corporate income tax rate on patenting. R&D incentives rather influence the tendency to invest in R&D, whereas the tax burden rather influences the scale of R&D investment and the count of patent applications. --Patent,R&D,Tax Incentives,Taxation,EU

International Tax Planning in the Age of ICT

The increased use of information and communication technologies (ICT) leads to new ways of doing business internationally. Nowadays, firm-specific intangible assets as well as services often constitute the most important factors for the creation of value. Besides, geographic distances tend to be less relevant. The main objective of international tax planning consists of minimising the effective tax rate of the whole company or group. In this paper, it is examined for several instruments of international tax planning whether new chances of minimising the effective tax rate emerge with the use of ICT and to what extent new risks occur. The analysis comprises the (re)location of a company?s residence, the (re)allocation of functions and risks, the implementation of a transfer pricing system, the choice of the form and location of investments abroad as well as hybrid forms of co-operation. For each instrument, both current and non-current tax issues are considered. We conclude that, due to ICT, it is easier to make use of the international tax differential by choosing the optimal location and form of investment and by allocating functions and risks. Thus, companies can pay more attention to the tax-optimal choice between international locations and the importance of this instrument to reduce the effective tax rate is further strengthened by the use of ICT. --International Company Taxation,Tax Planning,Information and Communication Technologies,Electronic Commerce

ICT and international corporate taxation: tax attributes and scope of taxation

In this paper, an outline of the consequences of the increased use of ICT on international corporate taxation, namely on the tax attributes and the scope of taxation, is given. It is argued that the concept of capital export neutrality shall prevail, as it is deemed to be the most appropriate to the changed economic structure. With regard to the tax attributes in the source state, an enlargement of the notion of a permanent establishment in order to shift tax revenues to the source state is not recommendable. Concerning the tax attributes in the residence state, it is shown in how far problems might arise and which alternatives might constitute a solution. As regards the scope of taxation, we recommend that international corporate taxation shall be based on taxation according to the residence principle. --International Corporate Taxation,Efficiency,Electronic Commerce,Information and Communication Technologies

Inwieweit eignen sich die International Accounting Standards für die steuerliche Gewinnermittlung?

Zwischen den International Accounting Standards (IAS) und der Steuerpolitik der Europäischen Kommission zeichnet sich eine immer deutlichere Verbindung ab. Innerhalb der EU könnten IAS über die im Juni 2002 verabschiedete EU-Verordnung zur Harmonisierung der handelsrechtlichen Rechnungslegungsvorschriften und über die laufenden Initiativen der Europäischen Kommission zur Schaffung einer konsolidierten Körperschaftsteuerbemessungsgrundlage auf die steuerliche Gewinnermittlung einwirken. IAS kommen als Ausgangspunkt für die steuerliche Gewinnermittlung durchaus in Frage. Ein grundsätzlicher Widerspruch zu den Zielen der steuerlichen Gewinnermittlung ist nicht auszumachen. Die Überlegenheit von IAS gegenüber den nationalen handelsrechtlichen GoB als Grundlage der steuerlichen Gewinnermittlung basiert auf den übergeordneten Gesichtspunkten der Schaffung einer einheitlichen europäischen Steuerbasis. Werden IAS zum Ausgangspunkt der Gewinnermittlung gemacht, muss sich die Übernahme aber auf zweckmäßige Einzelregelungen beschränken. Insgesamt wäre die Gewinnermittlung stärker an Zahlungen auszurichten, was (wie bisher auch) de facto zu einer Eigenständigkeit der steuerlichen Gewinnermittlung führt. Gleichzeitig wären Beschränkungen des steuerlichen Verlustausgleichs aufzuheben. Ein Übergang zur steuerlichen Gewinnermittlung auf Basis von IAS oder anderer Grundlagen innerhalb der EU würde die Wettbewerbsposition deutscher Unternehmen tendenziell verbessern. Eine ausschließliche Angleichung der steuerlichen Gewinnermittlungsvorschriften kann das Steuergefälle innerhalb der EU aber nicht verringern. Dazu wären weitere Maßnahmen erforderlich, insbesondere eine Angleichung der Ertragsteuersätze

Effective Marginal Tax Rates for US Investors in Germany and Europe : An Analysis of Recent Tax Reforms in Germany

In this paper the impact of the corporate tax systems of the 15 EU-member states on the investment and the financing decision of an US multinational corporation is analysed. The calculation of the resulting effective marginal tax rates (EMTR) closely follow the model of King and Fullerton. There is not only a great variation among the EMTR in the EU-member states which can affect cross-border location, investment and financing decisions. Moreover, recent reform proposals in Germany are likely to have an impact both on investment patterns and financing decisions of US multinationals in Germany

The common consolidated corporate tax base

This paper summarises the main topics that were discussed at the International Tax Conference on the Common Consolidated Corporate Tax Base which took place in Berlin on May 15th and 16th, 2007.1 First, it highlights the major tax obstacles to EU-wide economic activities. Second, it analyses different options for implementing a common tax base in the EU. Third, it deals with the most important implementation issues of a common tax base that were discussed at the conference in Berlin. Fourth, it includes some additional considerations on tax rates in case of a common tax base. The most important findings are summarised at the end

Steuerliche Förderung von Forschung und Entwicklung in Deutschland – Handlungsbedarf und Reformoptionen

Die Mitgliedstaaten der EUROPÄISCHEN UNION (EU) haben sich im Rahmen der Lissabon-Strategie das Ziel gesetzt, die Aufwendungen für Forschung und Entwicklung (FuE) bis zum Jahr 2010 auf 3 % des Brutto - inlandsprodukts (BIP) zu erhöhen. Deutschland liegt mit einem Anteil der FuE-Aufwendungen von 2,54 % des BIP innerhalb der EU-Mitgliedstaaten nur auf dem dritten Rang. Zur Erreichung des Lissabon-Ziels schlägt die EU-Kommission u. a. eine steuerliche Breitenförderung von Forschung und Entwicklung als wichtige Maßnahme vor. Vor diesem Hintergrund hat die Arbeitsgruppe „Steuerliche FuE-Förderung“ der Forschungsunion Wirtschaft – Wissenschaft geprüft, ob und mittels welcher Instrumente auch in Deutschland eine direkte steuerliche Förderung von Forschung und Entwicklung in Erwägung gezogen werden kann. Als Ergebnis werden konkrete Vorschläge zur Ausgestaltung einer steuerlichen FuE-Förderung in Deutschland entwickelt. Dieser Text bildet eine Diskussionsgrundlage für den gleichnamigen Vortrag des Autors am 1. Juli 2009 im ifo Institut, Niederlassung Dresden.Steuerbegünstigung; Forschung; Betriebliche Forschung; Forschungs- und Technologiepolitik; Erfindung; Deutschland