Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322001 
Year of Publication: 
2025
Series/Report no.: 
DIW Discussion Papers No. 2117
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
This paper documents the rise of corporate tax-base narrowing measures in the EU using a novel dataset covering both tax rate and tax base reforms implemented between 2014 and 2022. Our findings indicate a shift away from the 'cut rate - broaden base' approach, as governments increasingly align corporate taxation with industrial policy objectives. We show that EU tax competition exerts downward pressure on high-tax countries, while the likelihood of tax cuts also varies with the political orientation of governments. Using financial accounts from more than 40,000 affiliates, we find that the average effective tax rate of multinational enterprises in the EU has declined more rapidly than the statutory rate and estimate that tax base reforms account for 24% of this decline. The estimated revenue cost of all reforms combined amounts to 3.5% of total corporate tax revenue collected from the sample firms. These revenue losses should be carefully weighed against the anticipated benefits of tax reforms.
Subjects: 
Effective Tax Rates
Multinationals
Tax Competition
Corporate Income Tax
Tax Reform
Political Orientation
European Union
JEL: 
F23
H25
H26
P11
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.