We assess the economic impact of introducing consolidation with formula apportionment in the European Union and consider alternative enhanced cooperation agreements. We find that the consolidation is likely to yield a small aggregate welfare gain in Europe. However, not all countries benefit. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection which destroys the possibility of cooperation. We find that a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a Europe-wide reform.

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doi.org/10.1111/j.1475-5890.2010.00121.x, hdl.handle.net/1765/72172
Fiscal Studies
Erasmus School of Economics

Bettendorf, L., van der Horst, A., de Mooij, R., & Vrijburg, H. (2010). Corporate Tax Consolidation and Enhanced Cooperation in the European Union. Fiscal Studies, 31(4), 453–479. doi:10.1111/j.1475-5890.2010.00121.x