Formula Apportionment in the European Union: A Dream Come True or the EU’s Worst Nightmare?

The European Commission recently endorsed a future company tax policy that would allow companies to consolidate their tax bases and apportion the income across the EU using an allocation mechanism. This policy would replace the separate accounting method with formula apportionment of EU group profits as the main method of taxing multinational companies in the European Union. However, many details of the approaches remain to be presented, and these details may turn what appears to be a simple solution into an extremely complex one. This paper explores some technical details that arise in adopting formula apportionment in the European Union.

Input of the US Advisory Panel on Federal International Tax Reform

In November 2005, the U.S. President's Advisory Panel on Federal Tax Reform released a comprehensive Report titled “Simple, Fair, and Pro-Growth: Proposals to Fix America's Tax System.†The Report addressed all aspects of the federal income tax treatment of households and businesses under both domestic and international rules. This paper focuses on the proposals dealing with international elements of federal tax reform that affect multinational businesses. The report presents two broad Plans for improving the U.S. Internal Revenue Code in general and the international aspects of the Code in particular. The Simplified Income Tax (SIT) Plan recommends moving toward a territorial-based income tax system that would exempt active foreign-source business income of foreign branches and controlled foreign subsidiaries at the corporate level and would tax mobile foreign-source income. The Growth and Investment Tax (GIT) Plan recommends moving toward a consumption-based tax system that would tax U.S. businesses on total sales less certain inputs. To highlight the essential aspects dealing with the income tax, this paper will focus on the Simplified Income Tax Plan.U.S., federal tax reform, multinational businesses, territorial-based income tax system, foreign-source business income, subsidiaries, consumption-based tax system, Weiner

Cross-Border Loss Offset and Formulary Apportionment: How do they affect multijurisdictional firm investment spending and interjurisdictional tax competition ?

Motivated by the EU Commission‘s suggested company tax reforms, this paper investigates how cross-border loss offset and formulary apportionment of a consolidated tax base affect the investment and transfer pricing behaviour of a multijurisdictional firm, and how they affect the behaviour of governments potentially engaged in tax competition. The paper shows that cross-border loss offset mitigates both the reactions of a multijurisdictional firm to tax changes and the amount of tax competition engaged in by governments. However, formulary apportionment (with a consolidated tax base) boosts the sensitivity of firms to tax changes and increases the scope for interjurisdictional tax competition as well. For governments, formulary apportionment operates like a risk-sharing or partial equalisation mechanism.cross border loss offset, multinational firms, tax competition

Formula Apportionment in the European Union: A Dream Come True or the EU's Worst Nightmare?

The European Commission recently endorsed a future company tax policy that would allow companies to consolidate their tax bases and apportion the income across the EU using an allocation mechanism. This policy would replace the separate accounting method with formula apportionment of EU group profits as the main method of taxing multinational companies in the European Union. However, many details of the approaches remain to be presented, and these details may turn what appears to be a simple solution into an extremely complex one. This paper explores some technical details that arise in adopting formula apportionment in the European Union

Formulary Apportionment and Group Taxation in the European Union: Insights from the United States and Canada.

In 2001, the European Commission endorsed a future company tax strategy that would allow EU companies the option of calculating their EU profits on a common consolidated tax base and allow Member States to tax their share of that base at national rates. Implementing this strategy requires developing a formula to distribute the common tax base across the Member States. Although EU Member States currently do not use formulary methods to distribute a common consolidate tax base across national boundaries, Canada and the United States have extensive experience using formulary methods to distribute income across sub-national boundaries. Thus, the European Union can turn to North America to gain valuable insights into the design of a formulary apportionment system with common base taxation. This paper evaluates key issues that may arise when implementing common consolidated base taxation with formulary apportionment in the EU. These issues include the formula design, the definition of the company group and the definition and scope of the tax base. The paper also discusses potential economic consequences that may arise and suggests a potential apportionment system for the European Union.European Union, Corporate Taxation, Formulary apportionment, common consolidated base taxation, EU company tax reform

Integrating person directed care into the client experience

Culture Change leaders in long term care have identified creative ways to implement a model of Person Directed Care to improve the client experience by providing choice, instilling dignity, and fostering deep relationships among its community members. One organization created an environment of care called ”The Small House” and educated its’ workforce using the Green House® Project Legacy Alignment program to redesign the organizational structure, experience and environment. Interviews were conducted with elders, staff, and family members (N=20) about their experiences living, working or visiting a Small House as compared to experiences in their previous dwelling, a traditional nursing home. They were asked to describe the biggest difference between the Small House and the traditional nursing home model, and the differences in the two models in terms of the food, personal care, and relationships. Study participants were also asked to rate on a likert scale satisfaction with their experiences in the traditional nursing home and the Small House. Results showed that satisfaction ratings were higher among all groups living, working, or visiting the Small House compared to the traditional nursing home setting. The themes that emerged most often in comparing the Small House homes to the traditional nursing home included choice, homelike atmosphere, positive sensory environment, and evidence of close relationships in the Small House. The Small House homes studied in this qualitative investigation appear to have captured the important elements that create real home and consistent care partners who know the elders deeply to keep them comfortable and engaged

Allowance for Shareholder Equity - Implementing a Neutral Corporate Income Tax in the European Union

This paper proposes the introduction of a consumption-based corporate income tax in the European Union. Our proposal would guarantee neutrality regarding investment decisions and at the same time increase cost-efficiency. The proposal is based on the S-base cash flow tax, where transactions within the corporate sector are not at all taxable and only transactions be-tween shareholders and corporations are subject to tax. In contrast to existing S-base cash flow tax systems, tax deductibility of investments is deferred. Rather, the acquisition costs and capital endowments are compounded at the capital market rate and are set off against fu-ture capital gains. Dividends and withdrawals are fully taxable at the shareholder level. Be-cause of the similarities to the Allowance for Corporate Equity (ACE) tax our proposal is called Allowance for Shareholder Equity (ASE tax). The ASE tax exhibits the same neutrality properties as the traditional cash flow tax. More-over, the compounded inter-temporal credit method ensures that it is neutral with respect to the decision between domestic and foreign investment. To increase acceptance of the ASE tax, current taxpayers' documentation requirements will be reduced rather than extended. Our proposal is shaped in a way that it could be realized in a single EU country or in all member states of the EU