Tax Compliance Costs For Companies In An Enlarged European Community

"When it comes to taxation, administrative costs to the tax authorities and compliance costs to the taxpayers arise. A lot of studies have already been conducted in order to shed more light on such “hidden costs” of taxation. Particularly in the field of transfer pricing, administrative and compliance costs are assumed to be quite high due to the obligation of computing and documenting an arm’s length price for each intra-group-transaction. Apparently, European policy makers have also become aware of this problem since the European Commission’s report released in 2001 (“Company Taxation in the Internal Market”) recommends targeted measures in the short run and comprehensive ones in the long run, crossing the border line of the currently prevailing transfer pricing approach, inter alia in order to combat compliance costs in the field of transfer pricing. Eighteen national reports from countries all over the world and a general report deal with the basics of administrative and compliance costs of taxation in general as well as compliance costs in the field of transfer pricing in particular. The book is completed by three special reports on certain issues. The findings of the reports included is greatly influenced by the discussions on the occasion of the Jean Monnet Conference on this topic which was held in spring 2006 in Rust (Austria) under the academic guidance of the Institute for Austrian and International Tax Law at the Vienna University of Economics and Business Administration." -- Back cover.

This Study is an update of the European Commission study on tax compliance costs for SMEs published in 2018 which provided an overview of the impact of tax regulation on the tax compliance burden faced by small- and medium-sized enterprises (SMEs). This study adopts and refines the approach and the methodology used in the 2018 study and complements it with a full coverage of the EU Member States and United Kingdom. The purpose of this study is to estimate the administrative burden for SMEs and large enterprises in the European Union and its Member States plus the United Kingdom due to the fiscal rules for tax filing. Tax regulation is often written in a way that addresses all types of enterprises similarly, SMEs often face a comparative disadvantage to large-scaled enterprises (LSEs) as the burden of compliance falls disproportionately on them relative to their size and because they often do not have sufficient financial and human resources to manage their regulatory obligations. SMEs currently account for almost all European Union (EU-28) non-financial business sector enterprises (99.8%), two-thirds of total EU-28 employment (66.6%) and slightly less than three-fifths (56.8%) of the value added generated by the nonfinancial business sector. This is why even small improvements in the regulatory environment for SMEs may have a large impact on the economy of the EU. The scope of the analysis is the Fiscal Year 2019. The administrative burden is estimated for five categories of taxes: "Corporate Income Tax", "Value Added Tax", "Wage related taxes and contributions", "Property and real estate tax" and "Local and regional taxes" while the industrial sectors covered for this study are "Manufacturing", "Construction", "Wholesale and retail trade", "Accommodation and food service activities" and "Professional, scientific and technical activities".

Having spent almost fifty years of my life defending the separate accou- ing, arm's length pricing method, I have to admit that I was somewhat surprised to be asked to contribute to a book suggesting that the European Union might do well to consider adopting a formulary approach to deal with the taxation of inter and intra company transactions. I was even more surprised to see the invitation coming from Ms. Joann Weiner an ardent co-defender of arm's length pricing and my strong right arm in that regard while we both served in the U.S. Treasury Department in the mid '90s. The book gives Ms Weiner the opportunity to comment frankly from an insider's perspective of the many admitted problems of the arm's length system which could be avoided by a formulary approach. Ms. Weiner brings to this project a thorough expert knowledge of the b- efits and shortfalls of each of the systems she discusses - separate accounting v. formulary apportionment. Who better to decide to give qualified support to formulary than someone who organized a U.S. Treasury conference to defend arm's length pricing against a Congressional challenge in favor of formulary apportionment.

This study aims at quantifying tax compliance costs burdening private businesses in the EU by reviewing the available empirical literature and data. The review focuses on data that allows comparing and ranking different European tax systems, enterprises of different sizes and that engage, or not, in cross-border trade. The objective is to provide sound evidence about the drivers of tax compliance costs, the association with specific taxes, the possible existence of best-practice tax systems to draw inspiration for the design of EU-wide policies. Special attention is devoted to understanding the advantages and limitations of different methodologies and data sources, also in order to suggest avenues for future research on this topic.

This study aims at quantifying and comparing tax compliance costs burdening private businesses in the European Union by reviewing the available empirical literature and data with a focus on small and medium-sized enterprises. Data as well as methodological challenges are discussed and used to identify best-practice tax systems in Europe. We highlight differences in compliance costs met by firms of differing sizes, engaging or not in cross-border trade and for different tax types.

The reform proposal of the European Commission for a Common Consolidated Corporate Tax Base, the so-called CCCTB, is expected to significantly reduce the cost of doing business by lowering tax compliance costs for cross border operations within the European Union. However, to date the scarcity of comparable estimates on tax compliance costs has limited the assessment of such reduction. We exploit recently released and unique survey data designed to provide comparable information on corporate tax compliance costs in order to assess the impact of the CCCTB, using a general equilibrium modelling approach. Our results suggest that the reduction in tax compliance costs implied by the CCCTB would be associated with greater economic efficiency, including increases in both welfare and GDP. Member States resulting with the lowest compliance costs before the reform and having large inward foreign investment stock would benefit more from the CCCTB. Cross-border business operations would also benefit more from the CCCTB compared to domestic ones. The impact of the CCCTB on non-EU countries such as the US and Japan would be limited.

Analysis of problems in the field of company taxation in the Internal Market: the obstacles to cross-border economic activity and their possible remedies. This study (the major source document for the European Commission's policy statement on company taxation COM (2001) 582 also considers the possibilities for a reform of company taxation at EU level which would aim at providing companies with a single consolidated tax base for their EU-wide activities.

European Parliament legislative-initiative reports drawn up on the basis of Article 225 of the Treaty on the Functioning of the European Union are automatically accompanied by a European added value assessment (EAVA). Such assessments are aimed at evaluating the potential impacts, and identifying the advantages, of proposals made in legislative-initiative reports. This EAVA accompanies a resolution based on a legislative-initiative report prepared by the European Parliament's subcommittee on Tax Matters (FISC), presenting recommendations to the European Commission on avenues to follow to support the Next Generation EU recovery and lower compliance costs and improve EU corporate income taxation. The main purpose of the EAVA is to identify possible gaps in European Union (EU) legislation. The various policy options to address this gap are then analysed and their potential costs and benefits assessed.

"This paper offers an assessment of European corporate tax regimes using forward-looking indicators for corporate investment based on the Devereux-Griffith methodology. It draws on time series of average effective tax rates (EATR) using a detailed set of tax parameters for 27 EU Member States as well as some important non-EU countries."--Editor.