<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The introduction of a formulaically apportioned common consolidated corporate tax base (CCCTB) could represent a milestone in international taxation. No agreement has yet been reached, however. In contrast, Germany already has a long-standing system that apportions corporate taxes by splitting trade tax and corporate income tax. This conceptual study, presented at the European Accounting Association (EAA) Congress in Bergen in 2022, will examine whether the German method of splitting could lead to some lessons for an appropriate design for an international profit distribution formula.</p>
<p>Methodologically, we use a two-step approach: First, we compare the designs, and then we juxtapose both on a factual level. Next, we ask what the objectives these mechanisms have; do they even coincide? If the goals are not comparable, one cannot indisputably serve as a model for the other. We determine that, even though there are partial deviations, a closer look reveals significant overlaps; however, the German implementation is far from consistent and prioritises practicability. This leads us to our main result: The German system makes a clear value decision towards practicability, although there is a different set of aims. For the implementation of formulaic EU profit sharing, the lesson to be learned is that practicability should play a central role in the design of the formula. This lesson is important and helpful to accompany and support the implementation process in the EU.</p>
</abstract>

The introduction of a formulaically apportioned common consolidated corporate tax base (CCCTB) could represent a milestone in international taxation. No agreement has yet been reached, however. In contrast, Germany already has a long-standing system that apportions corporate taxes by splitting trade tax and corporate income tax. This conceptual study, presented at the European Accounting Association (EAA) Congress in Bergen in 2022, will examine whether the German method of splitting could lead to some lessons for an appropriate design for an international profit distribution formula.
Methodologically, we use a two-step approach: First, we compare the designs, and then we juxtapose both on a factual level. Next, we ask what the objectives these mechanisms have; do they even coincide? If the goals are not comparable, one cannot indisputably serve as a model for the other. We determine that, even though there are partial deviations, a closer look reveals significant overlaps; however, the German implementation is far from consistent and prioritises practicability. This leads us to our main result: The German system makes a clear value decision towards practicability, although there is a different set of aims. For the implementation of formulaic EU profit sharing, the lesson to be learned is that practicability should play a central role in the design of the formula. This lesson is important and helpful to accompany and support the implementation process in the EU.

Splitting of Corporate Taxes in Germany and Formulaic Distribution of a CCCTB – Critical Comparison

Faculty of Business Administration and Economics

Central European Economic Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The introduction of a formulaically apportioned common consolidated corporate tax base (CCCTB) could represent a milestone in international taxation. No...

	Splitting according to CCCTB-Proposal	Splitting in accordance with Trade Tax Act
Number of factors	3 factors	1 factor
Composition of the labour factor / content of the wage bill	- Wage bill and number of employees (half)- Concept of employee varies according to national definitions	- Wage total only- Definition of employee pursuant to § 7, para. IV, SGB IV
	- Inclusion of social security expenses
	- Inclusion of services to external parties who perform similar activities to those performed directly by employees
	- Inclusion of temporary workers
	- Presumably inclusion of vocational training
	- Presumably inclusion of tax-free remuneration
		- Capping limit
Alternative apportionment standards	Possible

Splitting of Corporate Taxes in Germany and Formulaic Distribution of a CCCTB – Critical Comparison

Publié en ligne: 30 nov. 2022

Pages: 269 - 290

DOI: https://doi.org/10.2478/ceej-2022-0016

Mots clés
splitting, formula apportionment, common consolidated corporate tax base, trade tax, German taxation

© 2022 Sandra Müller-Thomczik et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Figure 1

Figure 2

Figure 3

Figure 4

Comparison of the similarities and differences of the apportionment according to the CCCTB-Proposal and the Trade Tax Act

Splitting of Corporate Taxes in Germany and Formulaic Distribution of a CCCTB – Critical Comparison

Publié en ligne: 30 nov. 2022

Pages: 269 - 290

DOI: https://doi.org/10.2478/ceej-2022-0016

Mots cléssplitting, formula apportionment, common consolidated corporate tax base, trade tax, German taxation

© 2022 Sandra Müller-Thomczik et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Figure 1

Figure 2

Figure 3

Figure 4

Comparison of the similarities and differences of the apportionment according to the CCCTB-Proposal and the Trade Tax Act

Mots clés
splitting, formula apportionment, common consolidated corporate tax base, trade tax, German taxation