The distorting effects of imputation systems on tax competition in the EU Leonie Fischer, Jessica M. Müller & Christoph Spengel
By: Fischer, Leonie
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Contributor(s): Müller, Jessica M | Spengel, Christoph.
Material type: 
ArticleSubject(s): IMPUESTO DE SOCIEDADES | DIVIDENDOS | OPERACIONES INTRACOMUNITARIAS | IMPUTACIÓN DE RENTAS | METODOLOGÍA | UNION EUROPEA
In:
Intertax v. 51, n. 3, March 2023, p. 196-218Summary: The article researches how and to what extent the abolishment of discriminatory imputation systems in the EU Member States affected a country’s tax location attractiveness for capital investments and tax competition in the EU. It examines the impact of the replacement of discriminatory imputation systems with shareholder relief systems in five EU Member States from 1999-2019. The analysis is based on the cost of capital (CoC) and effective average tax rates (EATR) using the Devereux/Griffith methodology. The authors find that under the previous imputation systems, investments located in the shareholder's residence country had lower cost of capital and effective average tax rates compared to foreign investment alternatives. However, after the switch to shareholder relief systems, the lower cost of capital and effective average tax rates are, on average, reversed, putting tax competition pressure on the affected Member States.
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The article researches how and to what extent the abolishment of discriminatory imputation systems in the EU Member States affected a country’s tax location attractiveness for capital investments and tax competition in the EU. It examines the impact of the replacement of discriminatory imputation systems with shareholder relief systems in five EU Member States from 1999-2019. The analysis is based on the cost of capital (CoC) and effective average tax rates (EATR) using the Devereux/Griffith methodology. The authors find that under the previous imputation systems, investments located in the shareholder's residence country had lower cost of capital and effective average tax rates compared to foreign investment alternatives. However, after the switch to shareholder relief systems, the lower cost of capital and effective average tax rates are, on average, reversed, putting tax competition pressure on the affected Member States.
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