Bringing transparency, coordination and convergence to corporate

STUDY

EPRS | European Parliamentary Research Service

European Added Value Unit

PE 558.773 - September 2015

Bringing transparency,

coordination and

convergence to

corporate tax policies

in the European Union

I - Assessment of the magnitude of

aggressive corporate tax planning

PE 558.773 1

Bringing transparency, coordination

and convergence to corporate tax

policies in the European Union

Part I: Assessment of the magnitude of

aggressive corporate tax planning

Research paper

by Dr Robert Dover, Dr Benjamin Ferrett, Daniel

Gravino, Professor Erik Jones and Silvia Merler

This study has been written at the request of the European Added Value Unit of the

Directorate for Impact Assessment and European Added Value, within the Directorate-

General for Parliamentary Research Services (DG EPRS) for the European Parliament’s

Committee on Economic and Monetary Affairs (ECON) in relation with the legislative

own-initiative Report of Co-Rapporteurs Luděk Niedermayer and Anneliese Dodds,

MEPs.

Abstract

This paper assesses the loss of tax revenue to the EU through aggressive corporate tax

planning to be around 50-70 billion euro per annum. On an assumption of no base from

sources other than profit shifting, then this figure jumps to 160-190 billion euro. The

paper presents the methodology used and the country-by-country calculations on

which these figures are based. It describes the common tools used in aggressive

planning, and the impacts these have on tax revenue, concluding with an assessment of

the inefficiencies created by individual tax arrangements for large multinational

companies in the European Union.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 2

AUTHORS

This study has been written by Dr Robert Dover, Dr Benjamin Ferrett, Daniel Gravino,

Professor Erik Jones and Silvia Merler, at the request of the European Added Value

Unit of the Directorate for Impact Assessment and European Added Value, within the

Directorate-General for Parliamentary Research Services (DG EPRS) of the General

Secretariat of the European Parliament.

RESPONSIBLE ADMINISTRATORS

Risto Nieminen, Stanislas de Finance, European Added Value Unit of the Directorate for

Impact Assessment and European Added Value, within the Directorate–General for

Parliamentary Research Services of the Secretariat of the European Parliament.

To contact the Unit, please email EPRS-EuropeanAd[email protected].eu

LINGUISTIC VERSIONS

Original: EN

This document is available on the internet at: www.europarl.eu/thinktank

DISCLAIMER

The opinions expressed in this document are the sole responsibility of the authors and

do not necessarily represent the official position of the European Parliament.

Reproduction and translation for non-commercial purposes are authorized, provided

the source is acknowledged and the publisher is given prior notice and sent a copy.

Manuscript completed in September 2015. Brussels © European Union, 2015.

PE: 558.773

ISBN 978-92-823-7991-2

doi:10.2861/386200

QA-04-15-644-EN-N

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 3

Table of Contents

Executive summary ....................................................................................................................... 4

Chapter 1 – How much do aggressive corporate tax planning and tax evasion cost the

EU as lost tax income? What is the cost of corporate tax evasion and aggressive tax

avoidance at EU-level? .................................................................................................................. 7

1. Background ...................................................................................................................... 8

2. Country-by-country analysis ......................................................................................... 9

2.1. Shifting from national to European level, and consequential losses ...................... 11

3. Calculations of tax loss.................................................................................................. 13

3.1. Country-level indicators ............................................................................................... 13

Chapter 2 – What is the potential EU added value of addressing this lack of

transparency, coordination and convergence at EU level? .................................................... 17

1. Background .................................................................................................................... 17

2. Definition of tax avoidance .......................................................................................... 18

2.1. Theoretical background ................................................................................................ 18

3. Income shifting .............................................................................................................. 19

3.1. The relative advantages of common and separate tax jurisdictions....................... 25

3.2. Structural considerations.............................................................................................. 26

Chapter 3 – Macro-economic impact at single Member State level. What are the

channels through which spillovers operate? What are the spillover effects, within as

well as outside of the EU?........................................................................................................... 29

1. Background .................................................................................................................... 30

2. The net-effect of spillover activities ............................................................................ 30

2.1. Base spillovers through relocation .............................................................................. 32

2.2. Base spillovers through profit shifting ....................................................................... 32

2.3. Strategic spillovers......................................................................................................... 33

Chapter 4 – Do tax deals lead to collective (in)efficiency? ..................................................... 34

1. Background .................................................................................................................... 34

2. Inefficiencies................................................................................................................... 35

2.1. Organisational inefficiency........................................................................................... 35

2.2. Productive inefficiency ................................................................................................. 35

2.3. Informational inefficiency ............................................................................................ 35

2.4. Inefficient public goods provision............................................................................... 36

2.5. Summary of inefficiencies ............................................................................................ 36

References ..................................................................................................................................... 37

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 4

Executive summary

Aggressive tax planning and tax avoidance are the ostensibly legal practices of working

within a tax code, but using often sophisticated business and accountancy practices to

minimise a company’s tax liability. By contrast, tax evasion is the illegal practice of partial

or non-payment of taxes due. Presented like this, the two broad concepts of evasion and

avoidance appear as a binary. This is illusory: frequently aggressive tax planning is

prosecuted by tax authorities, and it becomes a matter for courts to decide whether the

practices were merely aggressive or in breach of the legal code. Similarly, it is for tax

authorities and legislators to work together to refine their systems and dispositions

towards prosecution. There is – therefore – much in the way of interpretation in this

public policy area.

We estimate that revenue losses for the EU as a result of corporate tax avoidance could

amount to around 50-70 billion euro, representing the sum lost to profit shifting. We

think this figure represents a lower-end estimate of lost revenue. If, however, we include

other tax regime issues, such as special tax arrangements, inefficiencies in collection and

other practices, we estimate that revenue losses for the EU due to corporate tax avoidance

could amount to around 160-190 billion euro, again a conservative estimate. We have

assessed the corporate income tax efficiency to be 75 per cent. This contrasts with the

IMF’s assessment of 86 per cent. The data and calculations used are provided in the

annexes to this report. These percentage figures do not represent the amounts that could

be expected to be recovered by the various tax authorities. A certain percentage of these

sums would be excessively expensive or technically difficult to collect, and would thus

remain uncollected. Similarly, our calculations do not include estimates for activities

within the shadow economy (which would themselves amount to evasion) that, if

factored in, would add substantially to these figures.

Our assessment is that if a complete solution to the problem of base erosion and profit

shifting were available and implementable across the EU, it would have an estimated

positive impact of 0.2 per cent of the total tax revenues of the Member States. The Annual

Macroeconomic Database of the European Commission (AMECO) calculates that the total

tax revenues collected over the EU as a whole were 5.74 trillion euro in 2011 (which is the

latest year for which such figures are available). This means a comprehensive solution

would add another 11.5 billion euro in revenues. While we believe that the calculation

on which this estimate is based is robust, we also believe that this figure is likely to be at

the lower end of what could reasonably be expected to be recovered through EU-level

regulation.

There is considerable empirical evidence that the Member States engage in strategic

competition when comes to setting taxes (essentially by adjusting the effective rate) and

to recovery practices (the latitude afforded to businesses in complying with the tax code).

Nonetheless, there are divergent views within the academic literature as to whether such

competition exists, and what impact it has if it does. Compounding the effects of this

empirically observable competition are the substantial differences in the published

estimates for lost tax revenue. These differences are the result of the absence of accepted

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 5

benchmarks for assessment, and of the radically different methodologies used by the

various governmental, academic and private accountancy institutions making the

assessments. For example, the most common – and largest – difference between

methodologies is the inclusion or not of tax allowances (for capital investment or staff

development) in the calculation of lost tax revenue; such inclusions serve to inflate the

stated calculation of tax revenue ‘lost’. Nevertheless, it would be useful to have, at EU

level, a coherent conceptual framework for building consistent and reliable benchmarks

to be used when assessing the impact of aggressive tax planning and tax avoidance

across the Member States and the EU. This would provide a firmer platform on which to

assess the different tax systems and rules prevalent across the EU, and in reducing the

opacity in the tax systems and arrangements. This opacity is fuelling strategic

competition among the Member States, and is reducing the effective tax rates levied on

businesses operating in the EU.

The reduction in ‘effective tax rates’ has a positive correlation with attracting foreign

direct investment (FDI). It does have to be recognised, however, that some forms of FDI

do not amount in a net gain to the recipient country, and that other forms (such as long-

term loans) are only weakly linked to FDI. Some studies have suggested that the

reduction in effective tax rates has similarly resulted in a reduction in government

investment in public services. These studies are highly contested and often do not take

into account the natural fluctuations contained within the economic cycle. The presence

of such studies may suggest that there is only a slight positive correlation between

reducing ‘effective tax rates’ and attracting FDI.

There is some evidence that businesses effectively pass on increased business taxes

through wage negotiations. The evidence is interesting because it also suggested that

wages did not rise, but that employment levels dropped. One academic study found that

once the cost of labour was factored in, every 1 euro reduction in corporation tax only

saved business 53 cents owing to an offset effect.

Aggressive tax-planning is increasingly occurring through spillovers. The main channels

through which spillovers occur are: base spillovers through relocation; base spillovers

through profit-shifting; and strategic spillovers (seen most commonly with highly mobile

capital and the registration of intellectual property). Currently the most effective

framework within which to discuss spillovers is via examples of individual countries: we

provide the contrasting examples of Germany, Ireland and the UK in the report.

As with revenue losses, measurements of ‘bottom-line’ figures for profit shifting are

complicated and contested. Those who have sought to measure profit shifting have only

been able to focus on the tax jurisdiction failing to recover funds, rather than on the

whole balance, which would necessarily include the recipient tax jurisdiction. As a

consequence, assessments of whole-picture net gains or losses are largely absent in

published assessments. As per the previous paragraph, we are able to compare and

evaluate the efforts of several Member States in this regard. We have made an assessment

that the net loss to the EU amounts to 50-70 billion euro per annum, a sum that would

justify the additional cost of EU-level regulation.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 6

The problem of the ease of reallocating taxable income via accounting mechanisms is

overstated. If reallocation via accounting were easy, there would be no benefit in

relocating real business activities to low-tax countries. We can observe empirically that

relocation is the predominant practice, and studies suggest that a 10 per cent reduction in

effective tax rate can produce a 30 per cent uplift in FDI, albeit with some caveats

regarding how the FDI is assessed and what its true impact is.

There is a great deal of tax competition between Member States, which has become

strategic and outward-facing in nature. Econometric data point to a trend whereby if one

country reduces its effective tax rate by 1 per cent, there is a commensurate downward

shift of 0.7 per cent among its key competitors. This means that lack of coordination at EU

level could lead to a race to the bottom. Accepting that the assessment of an effective tax

rate occurs ex post, further investigation is always required to validate the hypothesis

that a response occurs.

Individualised tax arrangements between major multinational enterprises and tax

authorities lead to four types of possible inefficiencies. These inefficiencies are the result

of both nominal and real effects of tax deals. They arise from aggressive tax strategies

based on transfer pricing and profit shifting, but they also arise from the impact of tax

deals on the location and pattern of investment.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 7

Chapter 1 – How much do aggressive corporate tax

planning and tax evasion cost the EU as lost tax income?

What is the cost of corporate tax evasion and aggressive

tax avoidance at EU-level?

Key findings

- We estimate that revenue losses for the EU due to corporate tax avoidance through profit

shifting are estimated to amount to around 50-70 billion euro.

- If, however, we assume no base from sources other than profit shifting, we estimate that

revenue losses for the EU due to corporate tax avoidance amount to around 160-190 billion

euro. This would encompass special tax arrangements, inefficiencies in collection and other

practices. The data and calculations used are provided in the annexes.

- It should be recognised that these figures do not represent the amounts that could be

expected to be recovered. Some percentage of these sums would be excessively expensive

or technically difficult to collect.

- We have assessed the corporate income tax efficiency to be 75 per cent. This contrasts with

the IMF’s assessment of 86 per cent.

- These figures do not include estimates for activities within the shadow economy (which

would themselves amount to evasion) that, if factored in, would add substantially to the

figures above.

- There is considerable empirical evidence that the Member States engage in strategic

competition when setting taxes and also in recovery practices. Compounding the effects of

this competition are the substantial differences in published estimates for lost tax revenues,

the result of an absence of accepted benchmarks for assessment and of the range of

radically different methodologies used by the various governmental, academic and private

accountancy institutions making the assessments. It should be noted that the difference

between tax evasion and tax avoidance is not a binary. There is a great deal of

interpretation between businesses, accountants, legislators and judicial authorities on these

questions.

- A common EU approach and methodology could help address the lack of operational

agreement between institutions. The relaunch of the Common Consolidated Corporate Tax

Base (CCCTB) could offer an effective solution to some of these problems.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 8

1. Background

On 10 May 2013 EurActiv, an online media on EU affairs, quoted European Council

President Herman Van Rompuy as saying that ‘every year around 1 trillion euro is lost in

EU Member States because of tax evasion and tax avoidance’. A similar figure is

presented on the European Commission’s Taxation and Customs Union website.

These

figures possibly reflect the findings of a report prepared by Murphy (2012).

A close look

at the report shows that, of the estimated loss of 1 trillion euro, 150 billion euro can be

attributed to tax avoidance (the minimisation of tax liability within the legal code),

resolvable through cost-effective regulatory and enforcement measures, whilst the

remaining loss of 850 billion euro is the result of tax evasion (the illegal non-payment or

under-payment of tax). While EU-level regulation can help mitigate the impact of

avoidance in a cost-effective way, only Member State-level responses (some of which will

be coordinated) can usefully address the problem of evasion.

That said, the reliability of the 1 trillion euro headline figure is open to question.

Although there is substantial evidence that tax avoidance and evasion impose significant

revenue losses, most economists agree that estimating those losses with any precision is a

challenge.

Existing estimates based on a macro approach (most of which are published

by NGOs) attract considerable public attention, but are difficult to interpret because of

the drawbacks associated with some of the measurement concepts. Moreover, many of

these published estimates include tax-reliefs (for capital investment, staff development

and so on) in the ‘lost revenue’. This is a highly questionable practice as these allowances

are designed to spur economic growth and, therefore, increase receipts in the medium

term. The inclusion of such allowances in these meta-figures also reduces the amount of

revenue that Member States could be expected to collect with more effective regulation

and collection. The calculations concerning what lost revenue can reasonably be

recovered rely on settled methodologies of calculating loss, and on the understanding

that only a proportion of lost revenues not attributed to allowances can affordably be

collected.

http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/a_huge_problem/index_en.htm.

Murphy, R. (2012), ‘Closing the European Tax Gap’, a report for the Progressive Alliance of

Socialists and Democrats in the European Parliament.

See, for example, Fuest, C. and Riedel, N. (2009), ‘Tax evasion, tax avoidance and tax expenditures

in developing countries: a review of literature,’ Report prepared for the UK Department for

International Development, Oxford: Oxford University Centre for Business Taxation; Hines, J.R.

(2014), ‘How serious is the problem of base erosion and profit shifting?’, Canadian Tax Journal, no. 2,

pp. 443-53; IMF (2014), ‘Spillovers in international corporate taxation’, IMF policy paper,

International Monetary Fund, May 2014; Maria Theresia Evers, Ina Meier, and Christoph Spengel

(2014), ‘Transparency in Financial Reporting: Is Country-by-Country Reporting suitable to combat

international profit shifting?’, ZEW Discussion Paper, http://ftp.zew.de/pub/zew-

docs/dp/dp14015.pdf.

An example of this – essentially based on the same sets of data – are the British Government’s

figure for the corporation tax gap in 2012-13 of GBP 3.9 billion, to be compared with Murphy’s

estimate of GPB 12 billion.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 9

Part of the problem is institutional and part is conceptual. Aggressive tax planning is a

legitimate practice in most countries. Moreover, firms argue that such aggressive tax

planning is not only part of their responsibility to shareholders, but also that it frees up

resources for investment and, thus, for economic growth. The sophistication of tax

planners in devising complex tax plans has largely been ahead that of government tax

authorities and the judiciary. Adding an extraterritorial dimension to tax planning has

allowed companies to shift their taxable profits to states where they will receive more

favourable tax treatment. A key characteristic of deliberative tax planning is the

reduction of current or future tax liabilities through strictly legal arrangements that can

be seen to contradict the intention behind the original law.

Aggressive tax planning involves the exploitation of technicalities and technical

weaknesses in a fiscal regime, or working with multiple tax regimes to identify loopholes,

gaps and terminological mismatches that allow for the reduction of tax liabilities. While

such practices let companies exploit gaps in international tax law, they are not illegal, but

rather ‘entrepreneurial’, with a political component in individual countries influencing as

to whether these practices are to be viewed as ‘acceptable’ within ethical, moral or

political frames of reference. There is no unitary or universally accepted distinction

between ‘acceptable’ and ‘aggressive’ tax planning.

The absence of such a unitary model

has allowed for a far greater quantum of activity to avoid tax across the Union than

would otherwise have been the case. In practical terms, a Europeanised response is the

only practical response to such issues (in terms of both organisation and of

implementation).

2. Country-by-country analysis

The most useful approach to begin an analysis of European tax loss is to use a country-

by-country analysis. Such analyses usually build on specific tax avoidance practices

rather than on an overview of phenomena such as aggressive corporate tax planning or

tax evasion. For example, according to Bach (2013), the annual revenue loss due to profit

shifting in Germany (explored later in conceptual terms) amounts to about

90 billion euro. ‘If the revenue from corporate taxation in Germany is divided by the

corporate income figures from the national accounts, companies’ average tax burden for

the period 2001 to 2008 is 21 per cent. This rate is considerably lower than the statutory

tax rates for this period (but is not out of line with prevailing business tax rates across the

developed world). The reason for this is that tax-reported profits were well below

macroeconomic profits. This tax gap in 2007 was something in the order of at least

120 billion euro, or almost five per cent of GDP. The high level of tax losses is significant.

By broadening the tax base as part of the corporate tax reform of 2008, the tax gap has

Adapted from European Commission (2012) Recommendation of 06.12.2012 on aggressive tax

planning,

http://ec.europa.eu/taxation_customs/resources/documents/taxation/tax_fraud_evasion/c_2012

_8806_en.pdf.

See Evers, Meier and Spengel (2014).

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 10

diminished significantly, but it was still at about 90 billion euro, or 3.7 per cent of GDP.’

That estimate is controversial. Heckemeyer and Spengel, for example, provide several

reasons to believe that Bach has overestimated the amount of the revenue loss; according

to their own calculations, the actual figure is likely to be less than 10 billion euro.

Another illustration comes from the United Kingdom. On the basis of a model presented

in his report ‘The Missing Billions’, Richard Murphy (2008) assesses that tax avoidance by

the largest 700 companies in the UK has cost the Inland Revenue some GBP 12 billion in

lost corporate income tax (CIT) (the current equivalent of circa 16.9 billion euro).

The

Oxford University Centre for Business Taxation (2012) criticised Murphy’s approach in

its report ‘The Tax Gap for Corporation Tax’. Specifically, the authors argued that

Murphy’s approach tells us more about the differences in tax and financial accounting for

corporate income and profits than it does about the absolute value of the revenue loss.

These illustrations reveal the importance of establishing reliable benchmarks and the

magnitude of financial implications of aggressive tax planning or tax avoidance. It is at

this point that the effects of the different institutional arrangements between nations and,

similarly, the individual national conceptual conventions become most apparent, as

radically different assessments and calculations are possible using the same evidence

base. The point is often made in the literature; suffice here to cite a recent description of

the methods used in popular estimation techniques: ‘For instance, taxable income or

respectively tax payments in absence of tax avoidance are approximated by using profits

from financial accounts multiplied by the statutory tax rate, company profits from

national accounts or foreign capital stocks multiplied by a deemed return and an average

tax rate. The differences between the actual tax payments or taxable profits and the proxy

for benchmark profits/tax payments in absence of tax avoidance can therefore not be

clearly attributed to profit shifting activity but rather capture conceptual differences

between the compared measures. This makes these figures difficult to interpret.’

The 2008 reforms came in several forms: the rate of corporation tax was reduced from 25 per cent

to 15 per cent, but there remained a ‘solidarity surcharge’ of 5.5 per cent. The average trade tax base

rate would now be 14 per cent (with local variations). The effective tax rate was estimated to be

29.8 per cent after the reforms. The tax cuts announced in the reforms were partly paid for through

reductions in allowances and deductions, but also with incentives for corporations to file in

Germany (indicating an assumption of increased tax revenues). In addition to the reduction of

corporate tax rates, there were new rules on interest-capping and change-of-control, and new

regulations for transfer-pricing. For the pricing estimate, see S. Bach (2013),

‘Unternehmensbesteuerung: Hohe Gewinne – mäßige Steuereinnahmen’, DIW Wochenbericht, pp. 3-

12.

J. H. Heckemeyer and C. Spengel (2008), ‘Ausmaß der Gewinnverlagerung multinationaler

Unternehmen – empirische Evidenz und Implikationen für die deutsche Steuerpolitik,

Perspektiven der Wirtschaftspolitik’, Perspektiven der Wirtschaftspolitik, vol. 9(1), p. 54.

R. Murphy (2008), ‘The Missing Billions: The UK Tax Gap’, Trades Union Congress: London.

Michael P. Devereux, Judith Freedman and John Vella (2012), ‘The Tax Gap for Corporation Tax’,

Oxford University Centre for Business Taxation: Oxford.

Adapted from Clemens Fuest, Christoph Spengel, Katharina Finke, Jost Heckemeyer, Hannah

Nusser (2013), ‘Profit Shifting and ‘Aggressive’ Tax Planning by Multinational Firms: Issues and

Options for Reform’.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 11

2.1. Shifting from national to European level, and consequential losses

As we shift from national to European level, we need to consider interactions across

national jurisdictions. There are a large number of research studies that assess the

significance of corporate tax avoidance and the impact that international tax incentives

have on avoidance strategies. For the purposes of this report, we have selected studies

that have passed a peer-review threshold and which can therefore be considered to have

been robustly challenged by the academic community. Huizinga and Laeven support the

assertion that the profits reported by European subsidiaries of multinational enterprises

(MNEs) often depend on specific tax incentives and on the potential for profit shifting

within the multinational group. Thus, European level action and regulation would serve

to reduce some of the incentives that currently exist for profit shifting within MNEs. As

Egger, Eggert and Winner reveal, the result is not only a redistribution of tax revenue but

also a reduction in overall tax payments, both in absolute terms and in relation to firms

that operation within only one national jurisdiction, owing to the effect that these tax

competition incentives have on prevailing tax rates. We suggest that there would likely

be reduced tax competition, and therefore reduced market-distorting incentives, were

European-level action to be introduced.

The challenge is to estimate this net revenue loss. Again, while there is substantial reason

to believe that aggressive tax planning takes place, very little is actually known about

what the impact of aggressive tax planning will be on net revenue loss, precisely because

it is neither in the interest of the businesses concerned, nor of their accountants, to reveal

the amount of corporate tax that has been avoided by taking planned steps. Recent

empirical research builds on extrapolations of the volume of profit shifting across

jurisdictions, and yet such approaches are likely to overestimate the gross losses within

countries and the net loss at European level, because of assumptions built into the

extrapolations that are based on figures of a small number of very large, listed MNEs.

Our research leads us to conclude that the relaunch of the Common Consolidated

Corporate Tax Base (CCCTB) in June 2015 offers an elegant solution to the complicated

issues pertaining to corporate taxation in the EU. If the Commission is able to conclude its

negotiations successfully, there is every reason to believe that that the CCCTB will reduce

the transaction costs for businesses operating across borders and, by having the force of

law (rather than the status of voluntary undertakings), also to minimise the opportunity

for them to avoid corporate taxes by exploiting gaps between individual national codes.

One empirical study that attempts to shed light on revenue losses is Hines’ recent

research report, published in 2014.

Some of the latest evidence suggests that the semi-

elasticity of income reporting is roughly 0.4, which means that a corporation that

operates in a jurisdiction with a 25 per cent tax rate, and that has the opportunity to

reallocate some of its taxable income to another jurisdiction that has a 15 per cent tax rate,

Ibid.

Hines, J.R. (2014). ‘How serious is the problem of base erosion and profit shifting?’, Canadian Tax

Journal, no. 2, pp. 443-53.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 12

will typically arrange its financial and other affairs to reallocate 4 per cent of its income to

the lower-rate country. For various reasons, discussed below, even this 4 per cent figure

may overstate the potential tax revenue income by eradicating base erosion and profit

shifting, but, on its own terms, the potential tax revenue from 4 per cent of pre-tax

incomes of multinational corporations make a limited but valuable contribution to the

government finances of most countries.

On average, a member country of the Organisation for Economic Co-operation and

Development (OECD) in 2011 generated 8.8 per cent of its total revenue from taxes on

corporate profits, only a portion of which represented taxes on multinational

corporations. As an illustrative estimate, 2 per cent would be two tenths of 1 per cent of

tax revenue – even if one were to double or quintuple this figure, it would amount to less

than 1 per cent of tax revenue. From this standpoint, it appears that even a complete

solution to the problem of having the tax base erode and the profits shifted to another

jurisdiction – were one available and implementable – would have little direct impact on

government finances.

To support his arguments, Hines notes that:

- The fact that governments of countries with high tax rates collect considerable

revenue from taxing the profits of their resident multinational corporations is in

itself an indication that tax avoidance is neither as easy nor as cost-effective as some

fear it is. If firms were able to organise their affairs in ways that would easily

redistribute pre-tax earnings in high-tax locations to alternative locations with zero

or very low tax rates, then most would surely do so, and even those corporations

without an international business presence would quickly establish operations in

foreign locations with lower tax rates in order to reduce their tax obligations. That

multinational corporations still seek to shift a proportion of their profits indicates to

us that a new European regulatory regime should place appropriate costs on MNCs

and, thereby, price out a reasonable proportion of profit-shifting for tax avoidance

purposes.

- If it were easy to reallocate taxable income via accounting tools, there would be no

benefit in locating real business activities in low-tax countries. The profit-

maximising strategy would be to locate business activity wherever it generates the

highest pre-tax profits, and use financial or other means to reallocate taxable income

to an affiliate located in a zero-tax location.

- Further evidence is available from the location of foreign business activities. Studies

consistently show that multinational firms locate more employment, property, plant

and equipment in locations with lower tax rates, and less in locations with higher tax

rates. Some of this movement can, in some instances, be accounted for by a lower

cost base in the recipient nation.

- Finally, there is evidence from the use of tax haven affiliates by multinational

corporations. Tax havens are those countries that have the lowest tax rates, and so

are the destinations of choice (if one has unfettered choice) for profits to be

Ibid.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 13

reallocated from high-tax countries. From 2002 to 2008, only 20 per cent of large

German multinational firms had tax haven affiliates. A majority of German firms did

not reallocate taxable income to tax havens, since they had no method of doing so,

given the absence of legal presence in those countries or the deterrent of prevailing

norms that mitigate against the practice.

Is it possible that corporate tax evasion and aggressive tax planning at EU-level is less

significant than generally assumed? In order to analyse this further, we need to unpack

the conceptual issues around tax evasion and tax avoidance and then generate some

preliminary estimates based on that conceptual reorganisation. Before doing so, however,

it is opportune to provide some rough estimates based on preliminary calculations.

3. Calculations of tax loss

Using public finance and national accounts data from Eurostat and the European

Commission’s publications on taxation trends in the EU, it is possible to obtain data on

corporate income tax (CIT) revenues, CIT rates and operating surplus (‘profits’) that can

be used to estimate the extent to which international tax planning may affect EU Member

States’ CIT revenues. Following the IMF’s report on spillovers, we propose a two-tier

approach.

3.1. Country-level indicators

At the first level, we have constructed country-level indicators of CIT efficiency (Eff

where Rev

is the actual CIT revenue of country i, Rate

is the CIT rate and Base

is the

‘theoretical’ tax base. The further Eff

lies below one (unity), the less efficient is the CIT

system in raising revenue in relation to the benchmark. This may reflect special tax

incentives and efficiency, but it also reflects profit shifting.

At the second level, to gain insight into which (and how much) Member States lose/gain

from profit shifting, we have constructed an indicator of ‘revenue without profit shifting’

(RWS

where is the average efficiency rate for the entire sample, which enables us to

eliminate (in a crude way) the base effects from sources other than profit shifting. The

International Monetary Fund (2014), ‘Spillovers in international corporate taxation’, IMF Policy

Paper.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 14

difference between ‘revenue without profit shifting’ (RWS

) and the ‘actual revenue’

(Rev

) could be interpreted as the loss/gain from profit shifting.

Importantly, it should be noted that there are three available measures of the operating

surplus (which is the measure for the theoretical tax base – surplus being the sum of

money that governments’ seek corporation tax for), namely: (i) gross operating surplus

(GOS); (ii) net operating surplus (NOS) not adjusted for imputed compensation for self-

employed workers (who are treated for tax purposes as being external contractors and,

therefore, not subject to payroll taxes, pensions and so on); and (iii) NOS adjusted for

imputed compensation for self-employed workers.

This gross operating surplus (GOS) is somewhat more inclusive than the standard

conceptualisation of a corporate income tax base insofar as it does not allow for the

subtraction of asset depreciation, interest payments or other provisions, which commonly

include allowances to reduce corporation tax for capital investment or staff development,

or for other measures determined to be both a business and a social good. Moreover, tax

treatment of losses across periods of assessment can create differences between the GOS

that appears as accrued in national accounts, as opposed to the corporate income tax base

that is relevant for tax assessment purposes. So the simple equation of income versus

expenditure, which gives rise to an operating surplus, rarely equates to the actual surplus

that is declared after allowances and deductions are factored in. Hence, it is reasonable to

expect the efficiency (Eff

) of the tax system relative to this corporate income tax base to be

reduced (i.e. below 1, or unity). This is why we subtract depreciation from the GOS to

create a net operating surplus (NOS). Calculations using this figure should bring us

closer to the ‘true’ corporate income tax base. Like earnings before interest and tax, NOS

is closer to tax accounting than national income accounting. Debates about different

forms of accounting standards and methods formed part of Parliament’s work in the

previous parliamentary session as part of the work stream associated with the

Transatlantic Legislators’ Dialogue. In the accompanying MS Excel sheet, in which we

presents our calculations, there are estimates for NOS inclusive of compensation to self-

employed (Computations (NOS not adj. SE) (2)) and NOS adjusted for the compensation

to self-employed (Computations (NOS adj. SE) (2)). We seek to rely on the latter estimate

because our revenue data is ‘taxes on the income or profits of corporations’, which

excludes the income of self-employed persons, whose surplus above costs is taxed as

personal income rather than as business profit, which would therefore be subject to

corporation tax.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 15

Estimates based on NOS adj. for SE yield the following CIT efficiencies:

As a benchmark, we think it is useful to compare these results to similar estimates based

on GOS presented by the IMF (2014).

The mean CIT efficiency is around 75 per cent (if

we estimate this over the period 2009-2013; see sheet (Computations (NOS adj. SE) (2)) in

red). (It should be noted that Spain, Hungary and Finland are excluded owing to a lack of

available data.) This is comparable to the figure given in footnote 134 in the IMF study,

whereby they report an average efficiency at 86 per cent. Note that while the implicit CIT

base is smaller than NOS, the variation between individual countries is large.

Estimates based on NOS not adj. for SE yield the following CIT efficiencies:

These results are similar to those presented in the IMF’s 2014 report.

IMF (2014), p. 66.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 16

We make two calculations for revenue losses. One is in line with IMF (2014) as described

above, whereby we calculate a variable called revenue without profit shifting (RWS).

Here we assume – the average efficiency rate for the entire sample to be equivalent

to 75 per cent. Therefore estimated revenue losses for the EU due to tax avoidance from

corporate taxation could then amount to around 50-70 billion euro (see sheet

(Computations (NOS adj. SE) (2)) in blue). If, however, we assume that profit shifting is

the only source, then we estimate that revenue losses for the EU due to tax avoidance

from corporate taxation could amount to around 160-190 billion euro (see sheet

(Computations (NOS adj. SE) (2)) in green). This is close to the estimate of around

150 billion euro presented in Murphy (2012). However, we assume that this is likely to be

an over-estimate, given that the differences between ‘revenue without profit shifting’ and

the ‘actual revenue’ could be the result of other factors: (i) cross-country differences in

compliance and enforcement; (ii) strategic responses to the tax policies of other countries

(international tax competition); or (iii) differences between ‘assumed’ and ‘true’ tax base.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 17

Chapter 2 – What is the potential EU added value of

addressing this lack of transparency, coordination and

convergence at EU level?

Key findings

- The establishment of a coherent conceptual, EU-wide framework for consistent and reliable

benchmarks for assessing the impact of aggressive tax planning and tax avoidance across

Member States and the EU would increase transparency.

- This would provide a firmer platform upon which to assess (a) the different tax systems and

rules prevalent across the EU, and (b) the revenue that is lost between Member States.

- Current opacity in the tax systems and arrangements across the EU is fueling strategic

competition amongst Member States, and is deteriotating the effective corporate tax rates.

- The local reduction in effective tax rates in individual Member States has a positive

correlation with attracting foreign direct investment.

- One study suggest that the competition in tax rates – which has resulted in an approximate

reduction of 15 per cent in the statutory corporate tax rate across a sample of OECD

countries – is associated with a reduction of 0.6-1.1 per cent of GDP in government

investment into public services, equating to 81-161 billion euro.

- The added value of transparency, coordination and convergence would come from the

potential to eliminate excessively low corporate income tax rates across all Member States,

thereby raising tax revenues and thus the potential for increased funding for public services.

1. Background

Corporate tax planning is understood to refer to the financial analysis carried out by

companies to achieve their goals in the most tax-efficient manner possible. Over recent

years, tax planning has received substantial media attention and is now once again at the

fore of the European policy debate in response to what some consider to be – in some

cases – abusive tax avoidance by MNEs. Indeed, the Commission’s competition authority

has asked the governments of countries such as the Netherlands, Luxembourg and

Ireland to explain their tax system rulings and to give details on assurances given to

several specific companies, including Abbott Laboratories, Amazon, Apple, Facebook,

Google, Microsoft, and Starbucks.

As recently as March 2015 the Commission presented

Barker, A., Smyth, J. and Steinglass, M. (2013), ‘Brussels probes multinationals’ tax deals’,

Financial Times, 11 Sep. 2013; Smyth, J., Steinglass, M. And Houlder, V. (2013), ‘Looking into

sweetheart tax deals’, Financial Times, 11 Sep. 2013.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 18

new plans on a mandatory information exchange as a means of tackling corporate tax

avoidance and harmful tax competition.

Differing tax rates and systems across countries (see Box 1 below) have given MNEs the

opportunity to employ different strategies, allowing them to reduce their tax bills

significantly. There is ample evidence that MNEs have been arranging their affairs in a

tax sensitive – or tax ‘efficient’ – manner. They have done this in several ways, but the

strategies used can broadly be categorised into two groups:

(i) locating the enterprise in a jurisdiction with low tax rates; and/or

(ii) shifting earnings or profits to low-tax jurisdictions.

Group (i) is self-explanatory while group (ii) encompasses controlled transactions by

MNEs to shift earning across countries. For instance, they may shift income into low tax

jurisdictions from jurisdictions with higher taxes in order to minimise payments. In this

sense, MNEs are accused of engaging in tax avoidance and, in some cases, evasion.

2. Definition of tax avoidance

An important distinction must be made between tax planning and tax evasion. Tax

planning (or, if defined loosely, tax avoidance) is legal (and includes strategies such as

shifting net revenues to low-tax jurisdictions while taking deductions for loss in high-tax

countries, exploiting any inconsistencies across national legislative frameworks,

including reporting calendars that make it possible to minimise tax obligations by

delaying the repatriation of earnings), while tax evasion is illegal (and takes the form of

non-payment by making false or no declarations about income to tax authorities). The

remainder of these notes focus on tax avoidance.

Another important contribution regarding transparency could be the establishment of a

coherent conceptual framework for reliable benchmarks for assessing the impact of

aggressive tax planning and tax avoidance across Member States and the EU as a whole.

2.1. Theoretical background

The original treatment of tax competition focused on interactions across a wider economy

consisting of multiple identical tax jurisdictions. Theorists have focused on how

policymakers compete to attract capital – which is the most mobile productive factor. The

models they used were game-theoretical (Cournot-Nash models), and the conclusion

they drew was widely accepted: if you can tax those productive factors that are relatively

less mobile, like labour, then it makes no sense to impose taxes on those factors that can

European Commission (2015), ‘Proposal for a Council Directive amending Directive 2011/16/EU

as regards mandatory automatic exchange of information in the field of taxation’, COM(2015)0135,

2015/0068 (CNS).

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 19

move out of the jurisdiction easily. This is the so-called ‘zero tax result’, which implies a

‘race to the bottom’ in terms of corporate income tax rates.

Such early modelling of tax competition quickly moved into more extreme conclusions. If

it makes no sense to tax mobile factors, then it might be attractive to offer a negative tax

or subsidy to attract mobile factors (again, like capital) to move from one jurisdiction to

the next. The Belgian notional interest rate reduction (notionele interestaftrek) is a good

illustration of this.

Such subsidies do not need to be market distorting in order to be

effective. On the contrary, they could help overcome market failures by providing access

to information about investment opportunities, human capital, growth prospects and

other relevant factors. By creating incentives for firms to relocate across jurisdictions,

policymakers could be helping those firms to exploit unrealised opportunities. The net

result of such redistribution of activity would be to improve welfare in the aggregate.

Whether such arguments find empirical support is one question; whether they influence

policy is another. Economists dispute the welfare consequences of tax competition. They

tend to agree, however, that tax competition exists. Policymakers use both statutory tax

rates and firm-specific exemptions to attract highly mobile capital from high-value

businesses. There is more controversy over which jurisdictions are most actively engaged

in the competition. For example, smaller economies, which have a lower ability to tax

immobile factors because they have a smaller pool of more highly mobile labour, would

be expected to be more aggressive in seeking to create tax advantages. Hence, scholars

such as Bucovetsky and Wilson have constructed models of asymmetric tax competition,

where large countries with market power have positive corporate income taxes while

smaller countries either have no taxes or engage in some form of subsidy to attract

capital.

Such arguments have obvious implications for discussions about tax policy in

the ‘core’ and ‘periphery’ countries of the European Union.

3. Income shifting

Zodrow, George R., and Peter Mieszkowski (1983) ‘The Incidence of the Property Tax: The

Bene

ﬁt View versus the New View’, in Zodrow, George R. (ed.),

Local Provision of Public Services:

The Tiebout Model after Twenty-Five Years, Academic Press, New York, NY, pp. 109–129 ; Zodrow,

George R. (2006), ‘Capital Mobility and Source-Based Taxation of Capital Income in Small Open

Economies’, International Tax and Public Finance, vol. 13(2–3), pp. 269–294; Razin, Assaf, and Efraim

Sadka (1991) ‘International Tax Competition and Gains from Tax Harmonization’, Economics Letters

no. 37 (1), pp. 69–76.

For an explanation, see ‘Notionele interestaftrek: uniek en innoverend belastingvoordeel in

België,’ FOD Financien, http://financien.belgium.be/nl/ondernemingen/vennootschapsbelasting

/belastingvoordelen/notionele_interestaftrek/.

Gordon, Roger H., and A. Lans Bovenberg (1996), ‘Why is Capital So Immobile Internationally?

Possible Explanations and Implications for Capital Income Taxation.’ American Economic Review,

vol. 86(5), pp. 1057–1075.

Bucovetsky, Sam, and John D. Wilson (1991), ‘Tax Competition with Two Tax Instruments’,

Regional Science and Urban Economics, vol. 21(3), pp. 333–350; Baldwin, Richard, and Paul Krugman

(2004), ‘Agglomeration, Integration and Tax Harmonization’, European Economic Review, vol. 48(1),

pp. 1–23.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 20

Firm specific subsidies are one instrument in tax competition, deductions and other

favourable treatment regimes are another. Hence, the difference between statutory tax

rates (meaning overall) and marginal tax rates (meaning once deductions and other

favourable treatment measures are taken into account) is important in models for tax

competition. This distinction will also play a role in shifting income across jurisdictional

boundaries.

There is a large amount of empirical research suggesting that MNEs are

readily able to reallocate profits to respond to tax differentials through the use of transfer

pricing mechanisms, inter-company transfers and transactions, licensing fees and so on,

and there is evidence that this practice is becoming widespread.

Since the turn of the century, the focus in the literature has been on the increasing

importance of competition in statutory tax rates, due to the relative ease of shifting

profits. Marginal tax rates become less important to tax competition in this context.

Scholars like Devereux, Lockwood and Redoano (2008) and Haufler and Schjelderup

(2000) have constructed models for tax competition that demonstrate that lowering

statutory tax rates whilst increasing marginal tax rates can have desirable results,

particularly if the companies in question have an element of foreign ownership.

These

early models focused on income shifting through transfer pricing. Later studies were able

to replicate these results in models where companies were able to reallocate debt in a

straightforward way, and in models in which firms are differentially mobile, with the

more mobile firm generating higher profits.

Such findings are important not simply because they help us understand how tax

revenue is distributed across jurisdictions, but also because of the implications that this

redistribution of tax revenues has for the provision of public services. Infrastructure

appears to be particularly hard hit. Gomes and Pouget (2008) provide evidence (taken

from 21 OECD nations

over a period running from 1966 to 2002) that tax competition

has reduced infrastructure spending wherever statutory tax rates have come down.

Zodrow, George R. (2010) ‘Capital Mobility and Capital Tax Competition’, National Tax Journal,

vol. 63(4), pp. 865–902.

Altshuler, Rosanne, and Harry Grubert (2006), ‘Governments and Multinational Corporations in

the Race to the Bottom,’ Tax Notes, vol. 110(8), pp. 459–474; Altshuler, Rosanne, and Harry Grubert

(2002), ‘Repatriation Taxes, Repatriation Strategies, and Multinational Financial Policy’, Journal of

Public Economics, vol. 87(1), pp. 73–107; Hines, James R., Jr. (1999), ‘Lessons from Behavioral

Responses to International Taxation’, National Tax Journal, no. 52 (2), pp. 305–322.; Desai, Mihir, C.

Fritz Foley and James R. Hines, Jr. (2004), ‘Foreign Direct Investment in a World of Multiple Taxes’,

Journal of Public Economics, vol. 88(12), pp. 2727–2744.; Desai, Mihir, C. Fritz Foley, and James R.

Hines, Jr. (2006), ‘The Demand for Tax Haven Operations,’ Journal of Public Economics, vol. 90(3),

513–531.

Haufler, A and Schjelderup, G (2000), ‘Corporate tax systems and cross country profit shifting,

Oxford Economic Papers, vol. 52(2), pp.306-325; Devereux, Michael P., Ben Lockwood, and Michela

Redoano (2008), ‘Do Countries Compete over Corporate Tax Rates?,’ Journal of Public Economics, vol.

92(5–6), pp. 1210–1235.

Fuest, Clemens, and Thomas Hemmelgarn (2005), ‘Corporate Tax Policy, Foreign Firm

Ownership and Thin Capitalization,’ Regional Science and Urban Economics, vol. 35(5), pp. 508–

526; Fuest, Clemens, and Becker, Johannes (2005), ‘Does Germany collect revenue from taxing the

normal return to capital?, Fiscal Studies, 2005, vol. 26(4), pp. 491-511.

Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy,

Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Switzerland, UK, US.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 21

Specifically, they estimate that the 15 per cent decline in statutory corporate income tax

rates across the OECD correlates with a reduction in public investment of 0.6–1.1 per cent

of gross domestic product (GDP).

OECD GDP was worth USD 42 trillion dollars in

2008; implying a reduction in public investment of between USD 250 billion and USD 462

billion that year alone. The latest figures available from the OECD puts GDP at a

USD 47.48 trillion

, which implies on the same extrapolation a reduction of USD 285-

522 billion.

Where there are significant possibilities for tax avoidance, there is less incentive for tax

competition across jurisdictions. MNEs that can avoid paying tax are unlikely to be

influenced by tax incentives. This means that relatively high tax rates are going to have

less influence on the distribution of economic activity across jurisdictions. It also means

that any distortions in accounting practices will result more from efforts at overall tax

avoidance than from efforts to shift profits or earnings from one jurisdiction to the next.

By implication, governments have to tackle two different challenges at once. First, they

have to eliminate the opportunities for firms to avoid tax payments through aggressive

tax planning and, second, they have to coordinate efforts across jurisdictions to ensure

that tax reforms do not create incentives for firms to move activity from one jurisdiction

to the next. Such efforts include the coordination of rules for the treatment of transfer

pricing, limits on tax deductions and other forms of special treatment, and treaties

designed to limit opportunities for avoidance. Much of this coordination takes place

within the context of the OECD.

Gomes, Pedro, and Francois Pouget (2008), Corporate Tax Competition and the Decline of Public

Investment,’ ECB Working Paper Series No. 928, European Central Bank, Frankfurt, Germany.

OECD, Gross Domestic Product – as Stated in Dollars, June 2015 - http://www.oecd-

ilibrary.org/economics/gross-domestic-product-in-us-dollars-2014-5_gdp-cusd-table-2014-5-en

Zodrow, George R. (2010), ‘Capital Mobility and Capital Tax Competition.’ National Tax Journal,

vol. 63(4), pp. 865–902.

European Commission (1997), ‘Towards Tax Co-Ordination in the European Union: A Package to

Tackle Harmful Tax Competition’, COM (97)0495, http://eur-lex.europa.eu/legal-

content/EN/TXT/PDF/?uri=CELEX:51997DC0495&from=EN; OECD (1998), ‘Harmful Tax

Competition: An Emerging Global Issue’, Organisation for Economic Co-operation and

Development, Paris, France; OECD (2000), ‘Towards Global Tax Cooperation: Progress in

Identifying and Eliminating Harmful Tax Practices’, Report to the 2000 Ministerial Council Meeting

and Recommendations by the Committee on Fiscal Affairs, Organisation for Economic Co-

operation and Development, Paris, France; Nicodème, G. (2006) ‘Corporate Tax Competition and

Coordination in the European Union: What Do We Know? Where Do We Stand?, European

Commission, Economic Papers no. 250, June 2006,

http://ec.europa.eu/economy_finance/publications/publication718_en.pdf.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 22

Box 1: National corporate income tax systems

The two principles that frame most national corporate income tax systems are ‘source of

profits’ and ‘residence of business’:

- ‘Source of profits’ refers in broad terms to the location where investments are made

and activity takes place. This is usually ascertained by physical presence. Legislators

establish thresholds for use by tax authorities in assessing where labor and capital is

said to work, where sales or other transactions are made, and where profits should be

booked. A firm that crosses these thresholds is deemed to create a permanent

establishment and, hence, incur tax liabilities. These liabilities are exclusive where tax

regimes are territorial – which is called the ‘exemption method’ in Europe. In other

words, activity should only be taxed in the jurisdiction that is regarded as its ‘source’.

- If ‘source of profits’ is based on physical presence, ‘residence of business’ is based on

legal status. A firm is ‘resident’ in that place where it has its primary activity. Once that

residence is established, it is possible for ‘home’ tax authorities to lay claim on the

firm’s worldwide income or earnings. Here too the taxation should be exclusive. The

challenge is to deal with any overlap in jurisdictions, otherwise firms would be

subjected to taxation twice (or more often) on the same activity. Legislators deal with

such potential overlap through the negotiation of bilateral tax treaties that establish

how tax obligations will be distributed across competing jurisdictions.

These two principles can be reconciled through treaty negotiation. The problem is that such

tax treaties have often been negotiated without coordination from one agreement to the

next. Hence there are significant complications across bilateral tax arrangements. Moreover,

these complications have increased as the ‘physical’ location of economic activity has

become more difficult to establish. As firms rely increasingly in intellectual property to

generate earnings, and on information technology to engage in transactions, the

establishment of physical presence or principal activity has become more difficult (IMF,

2014). Multinational enterprises are adept at exploiting any resulting ambiguities as part of

their tax planning. Hence national tax authories need not only to eliminate distortions across

bilateral tax arrangements, but also to improve their applicability in a new economic

environment.

Tax competition can take place through the implementation or enforcement of tax policy

as well as through the setting of statutory tax rates or the legislation of special tax

treatment. Hence, as Altshuler and Grubert argue, differential treatment of tax avoidance

(or tax planning) is another area of competition.

Where tax authorities believe that they

can maximise revenues or attract additional economic activity, they may facilitate the

efforts of MNEs to reduce their overall tax obligations through aggressive tax planning.

Altshuler, Rosanne, and Harry Grubert (2006) ‘Governments and Multinational Corporations in

the Race to the Bottom.’ Tax Notes, vol. 110(8), pp. 459–474.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 23

Box 2: Profit shifting strategies

There are many tax avoidance strategies than can be discussed in this note. Here we focus

on the more important and popular practices.

- Transfer pricing

Transfer pricing has to do with the potential mispricing of natural resources or intellectual

property rights so that costs are assigned to high-tax jurisdicctions and revenues are

attributed to low tax jurisdictions. Affiliates of the same MNE trade amongst themselves and

charge a price for these transactions, which affects the allocation of the MNE’s income

across jurisdictions (see, e.g., Hines 2014). The transaction does not need to be related to

the principal activity of the firm. All that is required is a remunerated exchange between

subsidiaries. So long as the charge is recorded in the high-tax jurisdiction and the payment is

received in the low-tax jurisdiction, the overall tax liabilities of the multinational enterprise

will decrease.

The ‘double Irish’ is a good illustration of this practice. The ‘double Irish’ refers to a tax

avoidance strategy that uses payments between different units or subsidiaries within a

multinational corporation to shift income from a higher-tax jurisdiction to a lower-tax

jurisdiction. This is possible insofar as Irish tax law does not penalise or restrict transfer

pricing. This creates an incentive for MNEs to create two distinct entities, one that is resident

and taxed in Ireland and another that is resident in Ireland but taxed in another jurisdiction

with lower taxes. The entity taxed in Ireland will absorb the charges associated with the use

of the firm’s intellectual property and use those to reduce its Irish tax liabilities; the entity

taxed elsewhere will receive the royalties from the use of the firm’s intellectual property and

pay taxes on those revenues in the lower tax jurisdiction. As a result of this two-entity

structure, the overall obligations of the MNE are reduced.

Tax authorities are well aware of the perverse incentives that give rise to transfer pricing. In

response, they try to legislate requirements that intra-firm transactions should be made at

the prices that would apply if they were to take place between different firms or at one step

removed. Such requirements are more easily enforced for widely traded commodities than

they are for intellectual property rights and other intangibles. The challenge for legislators is

to come up with standards that are transparent and enforceable without creating new

distortions in the distribution of economic activity. The implicit cost-benefit calculation is

that the measures designed to eliminate transfer pricing should not do more damage than

the practice of tax avoidance or tax planning.

Once again, the challenge is to find an adequate measurement of the impact of tax

avoidance. Some researchers, like Clausing (2003) or Heckemey and Overesche (2013), find

evidence to suggest that there is significant abuse of intra-company transactions by US

multinationals for reasons related to transfer pricing; researchers like Swenson (2001), by

contrast, find that practices like transfer pricing are not very responsive to cross-country tax

differentials. This suggests that the overall impact of transfer pricing could be small.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 24

Box 2: Profit shifting strategies (cont.)

The challenge is to generalise across economic sectors. Transfer pricing in manufacturing is

likely to be less important than in areas where ‘arm’s length’ or one-step-removed

transactions are less likely to generate ‘objective’ market prices. This includes not only

intellectual property, but also much of the trade in business-to-business and financial

services.

- Location of intangible assets

Differences in corporate income tax rates can also have an impact on the ‘location’ of

intangible assets. For example, there is some evidence to suggest that firms will file for

patents more frequently in jurisdictions with lower corporate income tax rates. This will alter

not only the overall volume of patents filed in a given jurisidictions but also the relative size

of intangible assets on the balance sheets of firms within that jurisdicution (Karkinsky and

Riedel, 2012; Grubert 2003; Dischinger and Riedel, 2011).

- Intra-company debt shifting

The differential treatment of interest expenses can also have an impact on tax liabilities.

Hence an MNE could organise loans from subsidiaries or other entities in jurisdictions where

interest expenses are given a lower rate of deduction to subsidiaries or other entities in

jurisdictions where interest expenses have a higher rate of deduction. Provided that the

taxable revenues in the two places are equivalent, the result will be a reduction in overall tax

obligations. With entities in multiple jurisdictions, it would be possible to use loans at

different rates of interest across entities located in each of the jurisdictions in order to

minimise the tax obligations of the MNE as a whole. There is significant empirical support to

suggest this practice is widespread (De Mooij 2011).

- Deferral of repatriation of profits

MNEs can hold earnings in tax jurisdictions with low marginal or effective tax rates until

there is a good reason to repatriate those earnings. In doing so, the MNE can defer payment

of tax. If there is the prospect that the home country will introduce a tax holiday or some

other incentive for repatriation in the near future, then the deferral can lower tax

obligations overall. There is significant evidence that US MNEs engage in this practice

generally and that many benefited from the one-year low-tax repratriation window

introduced in 2005 (Dharmapala et al., 2011; Marples and Gravelle, 2011).

- Treaty shopping

A final consideration is that MNEs may take advantage of the differences between bilateral

tax agreements in order to minimise their obligations, such as their obligations to

shareholders. For example, it may make sense to pay dividends to shareholders in markets

where they will receive more favourable tax treatment. The result would be a reduction in

net tax accrual.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 25

A second major area where action at EU level can add value is in the raising of important

themes for consideration both within and across Member States. Below are highlighted

some of those themes that have received most attention in the academic literature. They

are important as they set the stage for answering two final questions concerning the

relative advantage of common tax jurisdictions, and structural variables impact on

corporation tax.

3.1. The relative advantages of common and separate tax jurisdictions

A first theme is the relative advantages to be garnered from common and separate tax

jurisdictions. The question for the European Union is whether the creation of an

overarching tax jurisdiction would lead to a more even distribution of economic activity

across Member States (and hence a greater equalisation of their respective tax bases). This

question draws in part from the observation that while tax rates have declined across

Europe, the revenues collected via corporate income taxation have remained roughly

stable in consequence of the modest economic growth rates.

This stability may in part

be the result of greater coordination of favourable tax treatments (which create a

distinction between statutory and marginal tax rates), in part to a more even

redistribution of economic activity. Research by Timothy Goodspeed suggests that both

factors may have been at work across OECD countries in the late 1970s and early 1980s.

By extrapolation, greater efforts at fiscal integration and tax coordination within the EU

could offer significant welfare gains.

Other scholars (such as Genschel et al.) focus instead on the institutional context of tax

competition.

They present evidence to suggest that tax competition is stronger in the EU

than in the rest of the world as a result of the pressure generated via market integration

and enlargement. This pressure is not unmitigated, and the combination of coordination

measures undertaken within the Council of Ministers and the tax jurisprudence of the

European Court of Justice could potentially reduce it. Nevertheless, the net effect of

European integration has been the acceleration of tax competition across Member States.

Moreover, studies of EU tax policy show how the Commission has fostered the

emergence of two functionally differentiated policy arenas of closer market integration

and evolving areas of community law, dealing with different definitions of tax problems

and operating with modes of governance that suits the Commission’s own internal

logic.

This structure constrains the ability of European institutions to mitigate tax

competition among Member States. A more coherent European approach to tax policy

could generate additional welfare gains as a consequence.

Nicodème, G. (2006) op. cit.

Goodspeed, Timothy (1999), ‘Tax Competition and Tax Structure in Open Federal Economies:

Evidence from OECD Countries with Implications for the European Union’, ZEW Discussion Paper

no. 99-40.

Genschel, P., Kemmerling, A. and E. Seils (2011), ‘Accelerating downhill: how the EU shapes

corporate tax competition in the Single market’, Journal of Common Market Studies, vol. 49( 3),

pp.585-606.

Kraemer, U. S. and C. M. Radaelli (2008), ‘Governance Areas in the EU direct tax policy’, JCMS

2008, vol. 46(2), pp.315-336.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 26

These issues are relevant to other major European projects such as the completion of the

internal market and the development of a European capital markets union. For example,

standard models suggest that the increase in capital mobility would lead to downward

pressure on corporate income taxes in the EU. Research by Krogstrup (2006) suggests that

there is some merit to this claim.

Such research also makes it possible to make a

quantitative assessment of the importance of tax competition pressures within the

internal market. Studies have found that the increase in capital mobility may have

reduced corporate taxation by as much as 20 per cent between 1980 and 2001 across the

EU. The result, while not a ‘race to the bottom’, suggests that incentives that remain for

MNEs to engage in avoidance strategies exist, and that these could be mitigated by cost-

effective regulation.

3.2. Structural considerations

A second theme relates to the relative ease with which firms or workers respond to

differences in tax rates depending on the situation, by which we mean large structural

variables such as country size, foreign ownership, patterns of incorporation and the

balance of power between capital and labour. For example, research by Huizinga and

Nicodème (2006) shows that large Member States are able to place higher taxes on capital

(as the mobile factor) than smaller Member States. The explanation, as introduced above,

is that firms are less likely to leave larger countries than smaller countries.

In a similar vein, Huizinga and Nicodème test whether national governments are able to

impose higher tax burdens on foreign owners of corporations. Here the assumption is

that foreign owners will pay a premium to invest (or maintain their investments) in

domestic markets. To test this hypothesis, they use firm-level financial data together with

a variable to measure foreign ownership for 21 European countries over the period 1996-

2000. What they find is that an increase in the foreign ownership share by 1 per cent

correlates with an increase in the average corporate income tax rate by 0.5-1 per cent. This

statistical finding suggests that national tax authorities have achieved some success in

charging a tax premium on foreign investors.

There are other variations in institutional context that warrant consideration. One of

these is the pattern of incorporation. In most countries, firms can choose from a menu of

different legal structures; as a consequence, multinational firms and domestic firms tend

to cluster around different legal forms – with much domestic activity taking place

through varying forms of self-employment or other lower levels of incorporation. These

different organisational structures receive different tax treatment. Hence, it is necessary

to consider how these different tax treatments interact both within and across countries.

Egger et al. (2007) look at the interaction between personal and corporate rates of income

tax. Starting from the premise that domestic firms are more likely to face personal income

Krogstrup, S. (2006), ‘Are corporate taxes racing to the bottom, in the European Union?’

http://www.cer.ethz.ch/resec/sgvs/050.pdf.

Huizinga, H. and Nicodème, G. (2006), ‘Foreign Ownership and Corporate Income Taxation: an

Empirical Evaluation’, European Economic Review, vol. 50(5), pp.1223-1244.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 27

tax while multinational firms face corporate income tax, their expectation is that the two

tax rates would behave differently across countries. What they find is that the pattern of

interaction is similar. Domestic tax authorities respond to foreign changes in both rates of

taxation – corporate and personal. This finding was unexpected. National tax authorities

were expected to set personal income tax independently. The fact that personal income

tax rates interact across countries suggests that the scope for tax competition is wider

than just corporate income tax rates.

This cross-jurisdictional competition in terms of personal income tax rates should not be

taken to mean that labour is as mobile as capital. A further consideration, therefore, is the

extent to which MNEs shift the burdens of corporate income taxes onto the workforce.

There is some evidence that this is the effect. Arulampalam et al. (2012) used data from

more than 55 000 companies operating in nine Member States over a seven year period

(1996-2003). They looked for evidence of cross-country variation in tax liabilities after

controlling for the value-added of labour. What they found is that wage bills tend to vary

inversely with tax rates and that a 1 euro increase in corporate taxation results in a

0.49 euro decrease in pay-outs on wages. Indirectly, the non-mobile factor (labour) is

carrying almost one-half of the cost of taxation on the mobile factor (capital).

Firm responses

Firm responses to corporate income tax rates constitute a third set of themes for

consideration. The easiest place to start is within the MNE. Here the question is how

much variations in national tax regimes interact with the liability side of the balance

sheets of firms. Huizinga et al. speculate that a firm’s willingness to take on debt will vary

both with domestic tax rates and with any differences between domestic and foreign

taxes. What they find is that multinational firms have an incentive to shift their debt

burden onto entities operating in jurisdictions with relatively high corporate income tax

rates. These differences matter as multinationals have an incentive to shift debt to high-

tax countries. The predictions of the model are tested using a firm-level data for

European multinationals and their subsidiaries, combined with collected data on the

international tax treatment of dividend and interest streams. Empirical results show that

corporate debt policy indeed not only reflects domestic corporate tax rates but also

differences in international tax systems.

A second consideration is the volume of profit shifting. The expectation is that a

multinational will seek to minimise its tax burden across all jurisdictions within which it

operates. The precise strategy will depend both on the variation in tax regimes and on the

structure of operations. This is a more complex picture than the classical models

presented, and the implications are not always intuitive. For example, Huizinga and

Laeven built a model that focusses on the differentials across multiple jurisdictions and

then tested that model using detailed information about tax treatment coupled with firm-

level data. What they found is some evidence that firms will shift profits away from the

highest tax jurisdiction (the semi-elasticity is 1.43) and somewhat stronger evidence that

they will shift costs into the jurisdiction where they have the highest volume of activity

(the semi-elasticity is 1.65). The result is highly redistributive; most EU countries benefit

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 28

from tax revenue that might otherwise accrue to Germany. The overall impact on taxes

accruals, though, is less pronounced.

A third consideration is the structure of manufacturing investment. Here it is useful to

focus on the variation in effective marginal tax rates across different sectors of industry.

Such variation should necessarily take the mix of productive factors – capital, labour,

energy – into account. The presumption is that subtle differences in tax structures will

have an influence on the composition of manufacturing industry. Nevertheless, the

evidence suggests that this is not the case. Barrios et al. (2014) conduct a comprehensive

analysis of effective marginal tax rates across a range of countries, taking both sector-

specific considerations and the major factors of production into account.

They find little

evidence of the influence of tax policy on the sectoral composition of manufacturing. By

contrast, they find significant evidence that changes in the relative taxation of productive

factors can have an impact on firm strategy. The balance of taxation on labour and energy

is particularly important. Higher taxes on labour (or consumption) tend to have a larger

impact on a firm’s effective marginal tax rate than higher taxes on energy.

Barrios, S., Nicodème, G. and A.J. Sanchez Fuentes (2014), ‘Effective corporate taxation, tax

incidence and tax reforms: evidence from OECD countries’, European Commission Taxation

Working Papers, n. 45 – 2014, http://ec.europa.eu/taxation_customs/resources/documents/

taxation/gen_info/economic_analysis/tax_papers/taxation_paper_45.pdf.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 29

Chapter 3 – Macro-economic impact at single Member

State level. What are the channels through which spillovers

operate? What are the spillover effects, within as well as

outside of the EU?

KEY FINDINGS

- Wide-ranging measurement concepts make arriving at ‘bottom-line’ figures a highly

contested and problematic activity.

- Those seeking to measure profit shifting have only been able to focus on tax jurisdictions

failing to recover funds rather than on the whole balance, which would include the recipient

tax jurisdictions. As a consequence, assessments of whole picture net gains or losses are

largely absent from the existing literature.

- Our assessment is that even if a complete solution to the problem of base erosion and profit

shifting were available and implementable, it would have an estimated impact of 0.2 per

cent of total tax revenues for governments. Whilst robustly arrived at, we think this

estimate underplays the amount of revenue that is recoverable through a cost-effective

regulatory response.

- The problem of the ease of reallocation of taxable income is overstated but does occur at

scale.

- The main channels through which spillovers occur are:

- base spillovers through relocation;

- base spillovers through profit-shifting; and

- strategic spillovers (seen most commonly with highly mobile capital and the registration

of intellectual property).

- Currently the most effective framework for discussing spillover is the comparison of data for

individual countries: we provide the contrasting examples of Germany, Ireland and the UK.

- There is a great deal of tax competition between states that has become strategic and

outward-facing in nature. Econometric data points to a trend whereby if one nation reduces

its effective tax rate by 1 per cent, there is a commensurate shift of 0.7per cent among key

competitor states. A collective response to understanding and benchmarking tax

competition and its impacts would serve to reduce the motivations for tax competition

between Member States.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 30

1. Background

Although the discussion in previous chapters suggests that countries’ tax revenues may

be impacted through several channels, concern is usually directed not at the location of

economic activities but at the location of taxable income contingent on economic

activities. As we have noted above, most economists concede that estimating aggregate

tax revenue losses due to tax avoidance and evasion remains elusive despite substantial

evidence that both practices are widespread.

Existing estimates based on a macro

approach (mostly published by non-governmental organisations)

have the merit of

attracting the attention of a wider public, but are difficult to interpret because of the

drawbacks related to measurement concepts. Thus, it is very difficult to arrive at ‘bottom

line’ numbers for the overall sums at stake. Many attempts have been made to arrive at a

single estimate of the extent of profit shifting. In assessing these and other estimates, it is

also important to remember that they often look at only one side of the story: one

country’s revenue loss may be offset, though only partly, by other countries’ revenue

gains. This is also the case for the IMF report, published in 2014.

2. The net-effect of spillover activities

We note that the IMF’s 2014 report finds a large impact from profit shifting. This is

contested by some academics who argue, via longitudinal studies, that the impact on

revenue collection is modest.

Whilst longitudinal studies serve a comparative purpose,

work addressing the situation that prevails today is more interesting and relevant. In

particular, more recent research suggests that there is a degree of elasticity in the

reporting of income by MNEs. Evidence suggests that companies doing business in high-

tax regimes will seek to shift at least 2 per cent of their profits into lower tax regimes, as a

matter of course. When viewed in this context, the potential recovery potential of just 2-

4 per cent of the pre-tax profit of large corporations is likely to have a limited impact on

government finances. We assess that this would amount to an estimated 0.2 per cent of

the total tax revenues of governments.

The large revenues that governments still are able to collect from multinationals would

seem to indicate that aggressive avoidance is neither straightforward nor especially cost-

effective. We assume that all large, listed businesses would register in low tax regimes

were it straightforward to reallocate profits made in high tax jurisdictions to low tax

jurisdictions (actually, there would be little point in doing so because a paper-exercise

would suffice). However, given that the practice still continues, we believe that cost-

effective, EU-level regulation has the potential to make a significant contribution to the

elimination of tactical avoidance strategies.

In the statistical analysis of a large number of cases, Ruud de Mooij (2008) found a strong

correlation suggesting that a 10 per cent reduction in the effective corporate tax rate

See, for example, Fuest and Riedel (2010), Hines (2014), IMF (2014), op.cit.

See, for example, Murphy (2012), op.cit.

Hines (2014), op.cit.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 31

would result in up to a 30 per cent uplift in long-term foreign direct investment,

accepting – as earlier in this report – that making an assessment of FDI is complicated by

the myriad other factors that can effect it.

This is supported by findings presented in

other studies that show that multinational corporations locate more of their core business

activities in low-tax jurisdictions than one would expect given their business

requirements, providing further evidence of the influence that tax rates can have on

business decisions.

As pointed out above, there is some utility in examining the picture across country case

studies. Some interesting work by Dwenger explores how German businesses effectively

pass on increased business taxes through wage negotiation (specifically between 1998

and 2006).

The results of this study are particularly interesting as they suggest that

wages did not rise, but employment levels dropped. Dwenger found that once the cost of

labour was factored in, every 1 euro reduction in corporation tax only saved business

53 cents, owing to the offset effect.

In the UK, the finance department (HM Treasury) has produced evidence to show the

impact of the Computable General Equilibrium (CGE) model to the corporation tax

reductions announced since the change of government in 2010.

The coalition

Government, in an attempt to stimulate economic growth, reduced the headline rate of

corporation tax from 28 to 20 per cent (with the small profits rate being reduced from

21 to 20 per cent) over the life of the parliament. The Government assesses that this will

result in savings in the region of GBP 8 billion pounds a year for businesses. The

Treasury’s report makes the case that the reduction in the headline rates will actually

result in increased investment levels to the UK, and will also see an uplift in economic

activity that will, in turn, result in higher levels of employment and productivity, as well

as an increase in GDP of some 0.8 per cent, which equates to GBP 12.2 billion, itself a

much greater offset than the original cut. The Treasury have clearly sought to position

this policy in relation to the charge that such a reduction is ‘soft’ on business and that it

reduces the revenue pool from which to invest in public services; its analysis points to

something quite different.

In Ireland, where the level of corporation tax has been the source of European level

debate for some years, the Department of Finance published an impact assessment in

October 2014. Confirming the suspicions of the many critics of Irish business tax policy,

the Department of Finance’s report concluded that Ireland’s success in attracting FDI was

in large part the result of the business tax regime. When the Department of Finance

modelled alternative rates of corporation tax, it found that if it had adopted the European

average rate of 22.5 per cent, the number of non-Irish businesses investing in Ireland

de Mooij, R and Sjef Ederveen (2008), ‘Corporate tax elasticities: a reader’s guide to empirical

findings’, Oxford Review of Economic Policy, vol. 24(4), pp. 680-697.

Dwenger, N., Rattenhuber, P. and V. Steiner (2011), ‘Sharing the Burden: Empirical Evidence on

Corporate Tax Incidence’, F.U. Berlin Discussion Paper no. 19.

HM Treasury report (2013), ‘Analysis of the dynamics effect of corporation tax reductions’, The

Stationary Office: London.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 32

would have been halved over the period 2004-2012. Similarly, within this model, if it had

raised the 12.5 per cent rate to 15 per cent, some 22 per cent fewer firms would have been

attracted to invest in Ireland. The Irish case – which is an outlier in the EU because of

how low its corporation rates are – does demonstrate how price sensitive a peripheral

country is when engaged in tax competition and, indeed, how price sensitive foreign

firms are when choosing their destinations for tax planning purposes.

The effects that are felt in individual countries – and to be clear, the majority of studies

are around individual countries – invariably impact on third countries. This is what is

described as ‘spillover’. There are three broad types of spillover effect: 1) base spillovers

through the relocation of business out of one jurisdiction and into another; 2) the actual

impact of investment income flow into a jurisdiction with attendant questions around

securing public revenues; and 3) the strategic response of governments to the corporate

tax levies of another country (to use the examples above, one could hypothesise that the

UK Government lowered its corporation rate by some 8 per cent between 2010 – 2015

partly in response to the 12.5 per cent rate adopted by its near-neighbour, the Irish

Government). There will be other spillover effects on borrowing and exchange rates

affecting the relative economic fortunes of influential countries impacted positively or

negatively by spillovers.

2.1. Base spillovers through relocation

Businesses moving their operations into preferential tax jurisdictions present the most

visible, but also the most significant of spillover activities. The academic literature

suggests that relocation activity should meet with a corresponding effect in the recipient

and sending country. For those ‘losing’ businesses, the most natural response could be to

reduce the headline rate, but this is overly simplistic. To return to our UK and Irish

examples, the UK should not feel the need to over-respond to the Irish Government’s low

headline rate because the UK is a major economy and the impact of the relocation of

businesses to Ireland (a small economy) is unlikely to have a major impact on its ability to

attract FDI or recover tax revenues. The impact on large economies of responding to rate

reductions in smaller countries can be stark, with – as before – each percentage point

reduction being worth GBP 1 billion pounds to the UK exchequer when it cut its headline

rate. Taken across the EU area, where cuts of some 5 per cent have routinely been

observed during the same reporting period, the impact on the whole EU will be very

considerable indeed.

2.2. Base spillovers through profit shifting

Profit shifting relies on the juxtaposition of two or more tax codes in order to find ways of

exploiting possible gaps between them. In this scenario, the important factor is the ease

with which a company can shift profits. As the kind of information needed is

commercially sensitive, however, analysts are forced to employ a variety of much

rougher estimations and assessments (of the differences between tax rates and recovery)

in order to provide an approximation of the scale of the problem. The IMF, in its 2014

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 33

report, argues that the phenomenon of profit shifting is large, as is its impact on

governments setting rates.

As discussed above, European media outlets have reported extensively on the strategies

used by MNEs to shift profits to low-tax jurisdictions. There is now a thriving industry,

populated by non-governmental organisations, campaign groups and university scholars

to describe, and assess the impact of, this range of activities. One recent and prominent

example of this type of research is the collaborative investigation into the fast-food chain

McDonald’s, its profit-shifting practices and the impact of this on its business activity and

on the countries in which it does business.

The headline conclusion of the report was

that McDonald’s restructured its business in 2009 to facilitate the extraction of royalties,

amounting to billions of euros, from its European franchises. The particular techniques

that McDonald’s used were to relocate its main European headquarters from London to

Geneva (a lower-tax destination), to move royalty payments from its operational business

base to its franchising business located in Luxembourg (another low-tax jurisdiction) and

to open an additional office for franchise operations in Switzerland in order to take

advantage of a particular set of tax arrangements on intellectual property that existed

between the two locations.

The result of the changes to McDonald’s business structures – so the report argues – was

to radically reduce the amount of corporation tax the company pays in Europe. The

report assesses the value of this loss to European revenues to over 1 billion euro in the

four-year period 2009-2013.

While McDonald’s has been visibly highlighted by a coalition of campaign groups, there

is a large quantity of empirical evidence indicating that such practices are widespread,

even though the structures and payments used remain opaque. One might therefore

expect that the actual impact is larger than we have estimated here.

2.3. Strategic spillovers

As highlighted above, there is strong evidence that tax competition is occurring at

strategic level not just in Europe, but also between Member States and countries outside

of the EU area, particularly in Central Asia. Within OECD countries, Devereux and others

(2008) found that a 1 per cent decrease in the corporation tax rate of competitor nations

results in, on average, a 0.7 per cent reduction in response.

The result of spillover effects

will most keenly be felt – and exploited – by the most mobile forms of capital. It has been

found that there is greater sensitivity to headline rates, rather than to the effective rate of

tax, and this, in turn, suggests that governments are as highly sensitive to profit shifting

as they are to the classical concern of FDI.

EPSU, EFFAT, SEIU and War on Want (2015), ‘Unhappy Meal:

€1 Billion in Tax Avoidance on the

Menu at McDonalds’, Joint Report, 24 February 2015, Brussels.

Devereux, Michael P., Ben Lockwood, and Michela Redoano (2008), ‘Do Countries Compete over

Corporate Tax Rates?’, Journal of Public Economics, vol. 92(5–6), pp. 1210–1235.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 34

Chapter 4 – Do tax deals lead to collective (in)efficiency?

KEY FINDINGS

- Individualised tax arrangements between major multinational enterprises and tax

authorities lead to four types of possible inefficiences. These are the result of both nominal

and real effects of tax deals. They arise from aggressive tax strategies based on transfer

pricing and profit shifting, but also arise from the impact of tax deals on the location and

pattern of investment.

- Individual arrangements alter the balance between intra- and inter-firm trading in ways that

interfere with the ability of multinational firms to minimise transaction costs (organisational

inefficiency).

- Other arrangements redistribute economic activities to allow enterprises to benefit from

favorable tax treatment at the expense of other sources of comparative advantage, such as

those pertaining to the relative quality of labour and capital or the capacity for sustained

innovation (productive inefficiency).

- They distort accounting practices, making it more difficult both for governments and

investors to assess company performance (informational inefficiency).

- They create a mismatch between the accrual of tax revenue in one jurisdiction and the use

of infrastructure and public services in another (inefficient public goods provision).

1. Background

The focus of this chapter is on the individual arrangements made at national level on the

tax treatment of large MNEs. The key cases in Europe involve large household name-

brands such as Apple, Starbucks, Amazon, Fiat and Vodafone. These cases have attracted

widespread publicity in the countries affected, and have in several cases involved high-

profile parliamentary inquiries into the practices of the companies concerned. In the case

of the UK Parliament, these inquiries have become more a court of public opinion,

focusing on the ethics and morality of these techniques than in forensically assessing

whether the practices are compatible with the tax code.

In each case, Member State governments have provided assurances as to how revenues

will be recorded in the tax base and what levy will be charged, as a first attempt at

making such arrangements more transparent. The implicit consideration of individual tax

treatments is to create sufficient tax incentives to influence the location of economic

activity by any level of government. The means by which companies and their tax

advisors seek to create structures that allow them to reduce their tax liabilities while

remaining within the letter – if not the spirit – of the law are discussed above. Here the

focus is on the areas of (collective) inefficiencies that are produced by such individual tax

treatments.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 35

2. Inefficiencies

The concern is that such tax incentives lead to four forms of (collective) inefficiency:

2.1. Organisational inefficiency

Firstly, individual tax treatments alter the balance between intra- and inter-firm trading

in ways that interfere with the ability of multinational firms to minimise transaction

costs. This is an organisational inefficiency. The arrangements essentially serve to place

transaction costs upon businesses in a way that shapes and influences their core

behaviours. Governments have sometimes publicly justified such tax treatments in terms

of seeking to ensure that a strategically important MNE does not relocate offshore. We

can only assume that the individual businesses have made an assessment of the whole

cost and that the benefits of the individual tax treatment outweigh the possible efficiency

savings possible from a more flexible disposition.

2.2. Productive inefficiency

The second type of inefficiency generated by this phenomenon is the redistribution of

economic activity in order to benefit from favourable tax treatment at the expense of

other sources of comparative advantage, such as those pertaining to the relative quality

of labour and capital or the capacity for sustained innovation. This is a productive

inefficiency, and the logic of it is that the standard of services and goods being supplied

by the business as a consequence of the individual tax-treatment is less than would be the

case in the absence of the preferential tax-treatment. Such behaviour is classically

described as being protectionist, and the EU’s efforts in creating a single market are

designed to reduce the presence of protectionist policies across the area. It should be

noted that such productive inefficiencies do not apply to the same degree to businesses

that are predominantly e-commerce-oriented – and that have become a cause-celebre in

profit shifting and relocation activities – as they do to manufacturing concerns.

2.3. Informational inefficiency

The third type of inefficiency derives from the fact that individual tax treatments distort

accounting practices, making it more difficult both for governments and for investors to

assess company performance. This is an informational inefficiency and goes to the heart

of a common market trading area. Companies able to declare unexpectedly good trading

figures (as several European telecom giants have done in the previous two years) on the

basis of unexpectedly generous individual tax arrangements potentially obscures the

‘true’ performance of those businesses from investors. Such treatments are also likely to

be factored in by investors in subsequent years, drawing governments and tax authorities

into ever closer proximity with big business as – de facto – allocators of profit and loss,

something that the neoliberal political-economic shift of the 1980s was geared to

eliminate. There is an element of moral hazard to an arrangement whereby governments

and tax authorities are so closely involved in business performance.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 36

2.4. Inefficient public goods provision

The fourth and final major type of inefficiency involves the mismatch that these tax

treatments create between the accrual of tax revenue in one jurisdiction and the use of

infrastructure and public services in another. This can be described as inefficient public

goods provision. Such inefficiencies, which clearly are starker in times of economic

austerity, occur in situations where a large amount of economic activity is taking place

within the borders of one country, but the income and profit of which is filed in another

jurisdiction. A colourful illustration of this is the practice of some major e-commerce

activities in Greece – a nation that currently faces notable challenges in terms of public

sector investment – to file income and taxable profit in, to name but two preferential tax

jurisdictions, Luxembourg or Ireland. The shifting of such income and profit, while legal,

serves to reduce the revenues available to the first country, and, in so doing, the potential

pool of capital for public goods.

2.5. Summary of inefficiencies

These inefficiencies are the result of both nominal and real effects of tax deals. They arise

from aggressive tax strategies based on transfer pricing and profit shifting, but also from

the impact of tax deals on the location and pattern of investment. Ultimately, profit

shifting contains its own inefficiencies for the businesses involved. Complex and

expensive arrangements (be they advisory or structural) have to be put in place if they

are to capitalise on the profitable gaps created by comparing two or more European tax

codes. Such arrangements are also inefficient for governments, partly in terms of the

revenues that are lost, but also in terms of the potentially higher enforcement costs

associated with bringing high-value but marginal cases to court.

Individual tax treatments are seen by governments to be a convenient means by which to

ensure the recovery of a proportion of tax revenue that might otherwise be offshored.

There is some good evidence – as highlighted above – that such tax treatments also help

governments promote and attract additional FDI (albeit a contested concept with

contested numbers) and, thereby, are seen by some as a net promoter of economic

activity and growth. Lastly, in working with MNEs on tax arrangements, governments

believe they are reducing their costs in forensic examination and enforcement costs, and

potentially securing a larger recovery of income than might necessarily be the case. The

competitive element in this element of corporation tax is that which takes place between

private tax experts and those devising and enforcing the tax code – the former, in seeking

to generate value added for their clients, nearly always being able to deploy greater levels

of resources than the latter.

As noted above, the implementation of the CCCTB is the single largest step that the

European Union could take to overcome the problem of aggressive tax planning leading

to corporate tax avoidance. A common set of definitions, assessment tools and

methodologies would help to overcome the significant gaps that exist across the Union in

attempting to identify and quantify avoidance practices. A common and cost-effective

Union-wide regulatory framework is the most sensible and effective way of limiting and

eroding these practices.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 37

References

Altshuler, R. and Grubert, H. (2002), ‘Repatriation Taxes, Repatriation Strategies, and

Multinational Financial Policy,’ Journal of Public Economics, vol. 87 (1), pp. 73–107.

Altshuler, R. and Grubert, H. (2006). ‘Governments and Multinational Corporations in the

Race to the Bottom’, Tax Notes, vol. 110 (8), pp. 459–474.

Arulampalam, W., Devereux, M. P. and Maffini, G. (2012), ‘The direct incidence of corporate

income tax on wages’, European Economic Review, vol. 56(6), pp. 1038-1054.

Bach, S (2013) Unternehmensbesteuerung: Hohe Gewinne – mäßige Steuereinnahmen, DIW

Wochenbericht, pp. 3-12.

Baldwin, R., and Krugman, P. (2004), ‘Agglomeration, Integration and Tax Harmonization’,

European Economic Review vol. 48 (1), pp. 1–23.

Barker, A., Smyth, J. and Steinglass, M. (2013), ‘Brussels probes multinationals’ tax deals’,

Financial Times, 11 September 2013

Barrios, S., Huizinga, H., Laeven, L. and G. Nicodeme (2012), ‘International taxationand

multinational firm location decisions’, Journal of Public Economics, vol. 96(11), pp. 946-958.

Barrios, S., Nicodème, G. and Sanchez Fuentes, A.J. (2014), ‘Effective corporate taxation, tax

incidence and tax reforms: evidence from OECD countries’, European Commission Taxation

working papers n.45, May

Benassy-Quéré, A., Trannoy, A. and Wolff, G. (2014), ‘Tax harmonization in Europe: moving

forward’, VoxEU, July.

Betterdorf, L., Devereux, M. P., van der Horst, A., Loretz, S. and de Mooij, R.A. (2011),

‘Corporate tax reform in the EU: Weighing the pros and cons’, VoxEU, March.

Betterdorf, L., Devereux, M. P., van der Horst, A., Loretz, S. and de Mooij, R.A. (2011), ‘The

economic effects of EU-reforms in corporate income tax systems, Studies for the Consolidated

Corporate Tax Impact Assessment’.

Betterdorf, L., Devereux, M. P., van der Horst, A., Loretz, S. and de Mooij, R.A. (2009),

‘Corporate tax harmonisation in the EU’, Economic Policy, vol. 63, pp. 537:590.

Brueckner, JK, (2003) ‘Strategic Interaction Among Governments: An Overview of Empirical

Studies.’ International Regional Science Review vol. 26(2), pp.175–188.

Bucovetsky, S, and Wilson, JD (1991) ‘Tax Competition with Two Tax Instruments.’ Regional

Science and Urban Economics vol. 21(3), pp.333–350.

Clausing, K.A. (2003) Tax-motivated transfer pricing and US intrafirm trade prices, Journal of

Public Economics, vol. 87(9-10), pp. 2207-2223

De Groen, Willelm P. (2015) ‘Corporate taxation in Europe: let’s get it together!’, CEPS

commentary, February

De Mooij, R & Ederveen, S (2008) ‘Corporate tax elasticities: a reader’s guide to empirical

findings,’ Oxford Review of Economic Policy, vol. 24(4), pp. 680-697

De Mooij, R. (2011), ‘The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations,’

IMF Working Paper 11/95 (Washington: International Monetary Fund).

Desai, M, Foley, CF and Hines, JR., (2004) ‘Foreign Direct Investment in a World of Multiple

Taxes.’ Journal of Public Economics vol.88(12), pp.2727–2744.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 38

Desai, M, Foley,CF and Hines, JR Jr.(2006) ‘The Demand for Tax Haven Operations.’ Journal of

Public Economics vol.90(3), pp.513–531.

Devereux, MP, Lockwood, B and Redoano, M (2008). ‘Do Countries Compete over Corporate

Tax Rates?’ Journal of Public Economics vol. 92(5–6), pp.1210–1235.

Devereux, MP. and S. Lorentz (2012) ‘What do we know about corporate tax competition?’,

Working Paper 12-29, Oxford University,

http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/WP1229.pdf

Devereux, M, Freedman, J and Vella, J (2012), The Tax Gap for Corporation Tax, Oxford

University Centre for Business Taxation: Oxford.

Dharmapala, D., Foley, CF and Forbes, K (2011) ‘Watch What I Do, Not What I Say: the

Unintended Consequences of the Homeland Investment Act,’ Journal of Finance, Vol. 66 (June),

pp. 753–87.

Dharmapala, D and Riedel, N (2013) ‘Earnings Shocks and Tax-Motivated Income-Shifting:

Evidence from European Multinationals’ Journal of Public Economics vol. 97(1), pp.95-107.

Dischinger, M, and Riedel, N (2011) ‘Corporate Taxes and the Location of Intangible Assets

within Multinational Firms,’ Journal of Public Economics, vol.95 (August), pp. 691– 707.

Dwenger, N., Rattenhuber, P. and V. Steiner (2011) ‘Sharing the Burden: Empirical Evidence

on Corporate Tax Incidence’, F.U. Berlin Discussion Paper 19.

Egger, P., Pfaffermayr, M. and Winner, H (2007) ‘Competition in corporate and personal

income taxation’, April

EPSU, EFFAT, SEIU, and War on Want (2015) Unhappy Meal:

€1 Billion in Tax Avoidance on the

Menu at McDonalds, joint report, Brussels 24

February 2015

EurActiv (2013) http://www.euractiv.com/euro-finance/eu-leaders-prepare-tackle-tax-ha-

news-519618

European Commission (1997) ‘Towards Tax Co-Ordination in the European Union: A Package

to Tackle Harmful Tax Competition.’ Communication from the Commission to the Council,

COM (97) 495

ﬁ nal. European

Commission, Brussels, Belgium.

European Commission (2015) Council Directive amending Directive 2011/16/EU as regards

mandatory automatic exchange of information in the field of taxation, COM(2015) 135 final,

2015/0068 (CNS)

European Commission (2012) Recommendation of 06.12.2012 on aggressive tax planning.

European Union (2014) Taxation trends in the European Union, report produced by DG TAXUD:

Brussels.

Evers, M; Meier, I and Spengel, C (2014) ‘Transparency in Financial Reporting: Is Country-by-

Country Reporting suitable to combat international profit shifting?’ ZEW Discussion Paper

http://ftp.zew.de/pub/zew-docs/dp/dp14015.pdf

Fuest, C. and Riedel, N. (2009) ‘Tax evasion, tax avoidance and tax expenditures in developing

countries: a review of literature,’ Report prepared for the UK Department for International

Development, Oxford: Oxford University Centre for Business Taxation.

Fuest, C. and Riedel, N. (2012) Tax evasion and tax avoidance in developing countries: the role

of international profit shifting, Oxford University Centre for Business Taxation, WP 10/12

Fuest, C., Peichl, A., & Siegloch, S. (2012). Which workers bear the burden of corporate

taxation and which firms can pass it on? Micro evidence from Germany, Oxford University

Centre for Business Taxation, Working Paper No. 12/16, Said Business School, Oxford.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 39

Fuest, C, and Hemmelgarn, T (2005) ‘Corporate Tax Policy, Foreign Firm Ownership and Thin

Capitalization.’ Regional Science and Urban Economics vol.35 (5), pp.508–526.

Fuest, C. and Riedel, N. (2012). Tax evasion and tax avoidance in developing countries: the

role of international profit shifting, Oxford University Centre for Business Taxation, WP 10/12

Fuest, C; Spengel, C; Finke, K; Heckemeyer, J and Nusser, H (2013) Profit Shifting and

‘Aggressive’ Tax Planning by Multinational Firms: Issues and Options for Reform, Discussion

Paper No. 13-044, Centre for European Economic Research.

Genschel, P., Kemmerling, A. and E. Seils (2011) ‘Accelerating downhill: how the EU shapes

corporate tax competition in the Single market’, Journal of Common Market Studies, vol.49(3),

pp.585-606

Gomes, P and Pouget, F (2008) ‘Corporate Tax Competition and the Decline of Public

Investment.’ ECB Working Paper Series No. 928. European Central Bank, Frankfurt, Germany.

Goodspeed, T (1999) ‘Tax Competition and Tax Structure in Open Federal Economies:

Evidence from OECD Countries with Implications for the European Union’, ZEW Discussion

Paper No. 99-40.

Gordon, RH. (1986) ‘Taxation of Investment and Savings in the World Economy.’ American

Economic Review vol.76(5), pp.1086–1102.

Gordon, RH., and Bovenberg, AL (1996) ‘Why is Capital So Immobile Internationally?

Possible Explanations and Implications for Capital Income Taxation.’ American Economic

Review vol.86(5), pp.1057–1075.

Gresik, T.A. (2001) ‘The Taxing Task of Taxing Transnationals’, Journal of Economic Literature

vol.XXXIX, pp. 800-838.

Hau

ﬂer, A, and Schjelderup,

G (2000) ‘Corporate Tax Systems and Cross Country Pro

ﬁ t

Shifting.’ Oxford Economic Papers vol.52(2), pp.306–325.

Heckemeyer, JH & Spengel, C (2008) Ausmaß der Gewinnverlagerung multinationaler

Unternehmen – empirische Evidenz und Implikationen für die deutsche Steuerpolitik, Perspektiven

der Wirtschaftspolitik, p. 54.

Heckemeyer, J.H. and Overesch, M. (2013) ‘Multinationals’ profit response to tax differentials:

effect size and shifting channels’. ZEW Discussion Paper No. 13-045

Hines, J.R. (2014). How serious is the problem of base erosion and profit shifting? Canadian

Tax Journal, vol. 2, pp.443-53

Hines, James R., Jr., (1999) ‘Lessons from Behavioral Responses to International Taxation.’

National Tax Journal vol.52(2), pp.305–322.

HM Treasury report (2013) – ‘Analysis of the dynamics effect of corporation tax reductions’,

The Stationary Office: London

Huizinga, H. and Laeven, L (2006) ‘International Profit Shifting within Multinationals: A

Multi-Country Perspective’, European Economy Papers, n. 260, December

Huizinga, H. and Nicodème, G. (2006) ‘Foreign Ownership and Corporate Income Taxation:

an Empirical Evaluation’, European Economic Review, vol.50(5), pp.1223-1244.

Huizinga, H., Laeven, L. and Nicodème, G (2006) ‘Capital Structure and International debt

shifiting’, European Economic Papers, November

International Monetary Fund (2014). Spillovers in international corporate taxation, IMF Policy

Paper.

Part I - Assessment of the magnitude of aggressive tax planning

PE 558.773 40

Irish Department of Finance (2014) ‘Economic impact assessment of Ireland’s corporation tax

policy’, October

Karkinsky, T, and Riedel, N (2012) ‘Corporate Taxation and the Choice of Patent Location

within Multinational Firms,’ Journal of International Economics, vol.88 (September), pp. 176–85.

Kraemer, U. S. and Radaelli, C (2008) ‘Governance Areas in the EU direct tax policy’, Journal of

Common Market Studies, vol.46(2), pp.315-336

Krogstrup, S. (2006) ‘Are corporate taxes racing to the bottom, in the European Union?’,

http://www.cer.ethz.ch/resec/sgvs/050.pdf

Marples, DJ, and Gravelle, G (2011), ‘Tax Cuts on Repatriation Earnings as Economic

Stimulus: An Economic Analysis,’ Congressional Research Service Report for Congress

(Washington: Congressional Research Service).

Murphy, R (2008) ‘The Missing Billions: The UK Tax Gap’, Trades Union Congress: London

Murphy, R. (2012). Closing the European Tax Gap, a report for the Progressive Alliance of

Socialists and Democrats in the European Parliament.

Nicodème, G. (2006) ‘Corporate Tax Competition and Coordination in the European Union:

What Do We Know? Where Do We Stand?, European Economy papers n. 250, July

Organisation for Economic Co-operation and Development (1998) Harmful Tax Competition:

An Emerging Global Issue. Organisation for Economic Co-operation and Development, Paris,

France

Organisation for Economic Co-operation and Development (2000). Towards Global Tax

Cooperation: Progress in Identifying and Eliminating Harmful Tax Practices. Report to the 2000

Ministerial Council Meeting and Recommendations by the Committee on Fiscal Affairs. Organisation

for Economic Co-operation and Development, Paris, France.

Razin, A and Sadka, E (1991) ‘International Tax Competition and Gains from Tax

Harmonization.’ Economics Letters vol.37(1), pp.69–76.

de Mooij, R & Ederveen, S (2008). ‘Corporate tax elasticities: a reader’s guide to empirical

findings,’ Oxford Review of Economic Policy, Oxford University Press, vol. 24(4), pp.680-697.

Smyth, J., Steinglass, M. And Houlder, V. (2013) Looking into sweetheart tax deals, Financial

Times, 11 September 2013

Stewart, K and Webb, M (2006), International competition in corporate taxation: evidence

from the OECD time series, Economic Policy, vol.82, pp.154-201.

Swenson, DL., (2001) ‘Tax Reforms and Evidence of Transfer Pricing,’ National Tax Journal,

vol.54 , pp. 7–26.

Zodrow, GR. (2006). ‘Capital Mobility and Source-Based Taxation of Capital Income in Small

Open Economies.’ International Tax and Public Finance vol.13(2–3), pp.269–294.

Zodrow, GR., (2010) ‘Capital Mobility and Capital Tax Competition.’ National Tax Journal

vol.63(4), pp.865–902.

Zodrow, GR., and Mieszkowski, P (1983) ‘The Incidence of the Property Tax: The Bene

ﬁt Vi

versus the New View.’ In Zodrow, GR. (ed.), Local Provision of Public Services: The Tiebout Model

after Twenty-Five Years, pp.109–129. Academic Press, New York, NY.

Bringing Transparency, Coordination and Convergence to corporate Tax Policies in the EU

PE 558.773 41

Annexes

0,0

10,0

20,0

30,0

40,0

50,0

60,0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Tax Rates EU (1995-2013)

Belgium

Bulgaria

Czech Republic

Denmark

Germany

Estonia

Ireland

Greece

Spain

France

Croatia

Italy

Cyprus

Latvia

Lithuania

Luxembourg

Adjusted top statutory tax rate on corporate income (%), 1995–2014

Source: Taxation trends in the European Union 2014, pp. 36

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Belgium 40,2 40,2 40,2 40,2 40,2 40,2 40,2 40,2 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 35,0

Bulgaria 40,0 40,0 40,2 37,0 34,3 32,5 28,0 23,5 23,5 19,5 15,0 15,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 15,0

Czech Republic

41,0 39,0 39,0 35,0 35,0 31,0 31,0 31,0 31,0 28,0 26,0 24,0 24,0 21,0 20,0 19,0 19,0 19,0 19,0 24,0

Denmark 34,0 34,0 34,0 34,0 32,0 32,0 30,0 30,0 30,0 30,0 28,0 28,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 27,0

Germany 56,8 56,7 56,7 56,0 51,6 51,6 38,3 38,3 39,6 38,3 38,7 38,7 38,7 30,2 30,2 30,2 30,2 30,2 30,2 34,8

Estonia 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 24,0 23,0 22,0 21,0 21,0 21,0 21,0 21,0 21,0 23,0

Ireland 40,0 38,0 36,0 32,0 28,0 24,0 20,0 16,0 12,5 12,5 12,5 12,5 12,5 12,5 12,5 12,5 12,5 12,5 12,5 13,3

Greece 40,0 40,0 40,0 40,0 40,0 40,0 37,5 35,0 35,0 35,0 32,0 29,0 25,0 35,0 35,0 24,0 20,0 20,0 26,0 29,9

Spain 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 32,5 30,0 30,0 30,0 30,0 30,0 30,0 32,5

France 36,7 36,7 41,7 41,7 40,0 37,8 36,4 35,4 35,4 35,4 35,0 34,4 34,4 34,4 34,4 34,4 34,4 36,1 36,1 35,1

Croatia 25,0 25,0 35,0 35,0 35,0 35,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0 20,0

Italy 52,2 53,2 53,2 41,3 41,3 41,3 40,3 40,3 38,3 37,3 37,3 37,3 37,3 31,4 31,4 31,4 31,4 31,4 31,4 35,1

Cyprus 25,0 25,0 25,0 25,0 25,0 29,0 28,0 28,0 15,0 15,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 10,0 12,5 13,7

Latvia 25,0 25,0 25,0 25,0 25,0 25,0 25,0 22,0 19,0 15,0 15,0 15,0 15,0 15,0 15,0 15,0 15,0 15,0 15,0 16,6

Lithuania 29,0 29,0 29,0 29,0 29,0 24,0 24,0 15,0 15,0 15,0 15,0 19,0 18,0 15,0 20,0 15,0 15,0 15,0 15,0 16,6

Luxembourg

40,9 40,9 39,3 37,5 37,5 37,5 37,5 30,4 30,4 30,4 30,4 29,6 29,6 29,6 28,6 28,6 28,8 28,8 29,2 30,1

Hungary 19,6 19,6 19,6 19,6 19,6 19,6 19,6 19,6 19,6 17,6 17,5 17,5 21,3 21,3 21,3 20,6 20,6 20,6 20,6 19,8

Malta 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0 35,0

Netherlands

35,0 35,0 35,0 35,0 35,0 35,0 35,0 34,5 34,5 34,5 31,5 29,6 25,5 25,5 25,5 25,5 25,0 25,0 25,0 29,0

Austria 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 34,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 27,8

Poland 40,0 40,0 38,0 36,0 34,0 30,0 28,0 28,0 27,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 21,0

Portugal 39,6 39,6 39,6 37,4 37,4 35,2 35,2 33,0 33,0 27,5 27,5 27,5 26,5 26,5 26,5 29,0 29,0 31,5 31,5 29,6

Romania 38,0 38,0 38,0 38,0 38,0 25,0 25,0 25,0 25,0 25,0 16,0 16,0 16,0 16,0 16,0 16,0 16,0 16,0 16,0 18,8

Slovenia 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 25,0 23,0 22,0 21,0 20,0 20,0 18,0 17,0 22,4

Slovakia 40,0 40,0 40,0 40,0 40,0 29,0 29,0 25,0 25,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 19,0 23,0 21,0

Finland 25,0 28,0 28,0 28,0 28,0 29,0 29,0 29,0 29,0 29,0 26,0 26,0 26,0 26,0 26,0 26,0 26,0 24,5 24,5 26,7

Sweden 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 26,3 26,3 26,3 26,3 22,0 27,0

United Kingdom

33,0 33,0 31,0 31,0 30,0 30,0 30,0 30,0 30,0 30,0 30,0 30,0 30,0 30,0 28,0 28,0 26,0 24,0 23,0 28,4

Norway 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0 28,0

Iceland 33,0 33,0 33,0 33,0 30,0 30,0 30,0 18,0 18,0 18,0 18,0 18,0 18,0 15,0 15,0 18,0 20,0 20,0 20,0 18,9

EU-28 35 35 35,2 34,2 33,5 32 30,4 29 28 26,8 25,3 25,1 24,4 23,8 23,8 23,2 23 22,9 23,2 25,3

EU-27 35,3 35,3 35,2 34,1 33,5 31,9 30,7 29,3 28,3 27 25,5 25,3 24,5 24 23,9 23,3 23,1 23 23,3 25,5

EA-18 36,2 36,3 36,4 35,2 34,7 33,9 32,6 31,2 29,8 28,8 27,4 27 26,2 25,7 25,6 25 24,8 24,8 25,5 27,3

EA-17 36,8 37 37 35,8 35,2 34,4 33 31,8 30,4 29,6 28,1 27,7 26,8 26,3 26,2 25,6 25,4 25,4 26,1 27,9

Taxes on the income or profits of corporations (Million euro)

Source: eurostat (finance); see saved doc called Revenues in Private Work EP

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

European Union (28 countries)

: : : : : : : : : : : : : : : : : : :

European Union (27 countries)

: : : : : : : : : : : : : : : : : : :

Belgium 5.108 5.781 6.231 7.706 7.700 8.085 8.087 8.139 7.911 8.990 9.814 11.369 11.760 11.598 8.113 9.261 10.692 11.689 12.294

129.716

Bulgaria 450 398 467 443 376 365 568 485 461 492 379 484 1.260 1.038 823 654 678 676 786

8.786

Czech Republic

1.938 1.640 1.930 1.872 2.154 2.111 2.771 3.465 3.733 4.035 4.533 5.424 6.165 6.492 5.006 5.039 5.247 5.069 5.093

62.070

Denmark 3.249 3.653 4.021 4.677 3.889 5.672 5.008 5.321 5.443 5.880 7.327 8.334 7.365 6.176 4.417 5.513 5.407 6.591 6.756

79.537

Germany (until 1990 former territory of the FRG)

36.924 43.833 45.893 48.952 53.829 57.980 33.547 33.140 37.692 46.258 53.573 66.303 69.801 64.210 45.607 52.932 64.980 70.093 70.215

708.351

Estonia : : : : : : : : : 55 57 52 65 59 39 35 37 56 62

515

Ireland 1.408 1.800 2.271 2.618 3.442 3.885 4.144 4.804 5.155 5.335 5.503 6.685 6.393 5.071 3.889 3.944 3.751 3.964 4.272

62.910

Greece : : : : : : : : : : : 5.997 6.042 6.231 5.960 5.706 4.589 2.314 2.429

39.268

Spain : : : : : : : : : : : : : : : : : : :

France 21.755 25.852 29.112 31.193 36.872 40.746 46.279 39.984 34.604 39.536 40.900 53.485 56.765 56.609 32.001 44.286 51.532 52.267 56.120

604.368

Croatia : : : : : : : 519 594 612 834 1.134 1.344 1.393 1.152 871 1.041 877 890

11.259

Italy 28.958 37.413 43.323 26.738 30.773 27.632 36.134 32.262 28.739 30.038 33.533 43.753 50.457 47.767 37.406 36.735 35.768 37.732 40.377

490.700

Cyprus 281 325 344 417 545 622 671 670 507 471 634 803 1.079 1.218 1.096 1.075 1.228 1.114 1.171

11.737

Latvia 69 82 119 138 139 132 176 198 152 196 260 367 572 727 291 174 283 357 370

4.123

Lithuania : : : : : : : : : 339 437 663 734 888 489 276 253 433 477

4.989

Luxembourg

1.036 1.100 1.220 1.321 1.328 1.533 1.651 1.926 1.892 1.571 1.753 1.680 1.977 2.003 2.075 2.311 2.148 2.257 2.213

25.458

Hungary : : : : : : : : : : : : : : : : : : :

Malta 66 54 78 71 94 135 126 131 163 128 146 171 258 295 305 322 311 362 421

3.139

Netherlands

10.460 13.435 15.418 16.132 17.215 18.140 18.800 16.530 14.502 16.266 18.735 19.978 21.049 21.179 13.293 14.589 14.046 13.697 14.074

216.738

Austria 2.881 3.870 4.084 4.440 3.881 4.526 6.923 5.247 5.200 5.607 5.766 5.964 7.069 7.468 5.114 5.810 6.470 6.679 7.251

80.568

Poland 2.935 3.300 3.759 3.980 3.767 4.454 3.802 4.151 3.365 4.004 5.234 6.537 8.543 9.819 7.098 7.041 7.681 8.092 6.993

82.358

Portugal 2.062 2.562 3.141 3.346 4.141 4.744 4.379 4.641 3.989 4.279 4.132 4.705 6.073 6.286 4.819 4.919 5.521 4.649 5.537

63.928

Romania 1.056 905 1.334 1.378 1.282 1.302 1.143 1.276 1.476 1.935 2.163 2.778 3.812 4.185 3.139 2.853 3.110 2.852 2.931

33.651

Slovenia 83 151 184 193 241 250 287 385 448 524 795 920 1.116 934 652 668 611 446 433

8.219

Slovakia 903 717 689 646 595 575 611 654 812 882 1.049 1.294 1.637 2.012 1.577 1.659 1.699 1.715 2.118

17.719

Finland : : : : : : : : : : : : : : : : : : :

Sweden 5.040 5.554 6.327 5.899 7.397 10.054 6.587 5.407 6.084 8.511 10.750 11.547 12.845 9.810 8.650 11.776 12.530 10.951 11.912

127.359

United Kingdom

23.612 29.350 44.869 48.289 47.169 52.988 55.923 46.860 43.725 49.078 59.054 73.473 65.609 62.118 42.666 51.398 53.168 53.288 49.713

706.072

Norway : : : : : : : : : : : : : : : : : : :

Switzerland

4.241 4.261 4.300 4.686 5.875 7.191 8.442 7.614 7.008 6.885 7.339 9.374 9.811 11.172 11.067 11.916 14.241 14.539 14.550

133.957

Taxes on the income or profits of corporations (Million national currency)

Source: eurostat (finance); see saved doc called Revenues in Private Work EP

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

European Union (28 countries)

: : : : : : : : : : : : : : : : : : :

European Union (27 countries)

: : : : : : : : : : : : : : : : : : :

Belgium 4.882 5.632 6.261 7.760 7.700 8.085 8.087 8.139 7.911 8.990 9.814 11.369 11.760 11.598 8.113 9.261 10.692 11.689 12.294

129.716

Bulgaria 40 89 883 872 736 713 1.106 946 899 961 742 947 2.465 2.030 1.610 1.280 1.327 1.321 1.538

17.172

Czech Republic

67.255 56.510 69.357 67.464 79.458 75.155 94.393 106.731 118.882 128.665 134.989 153.713 171.179 161.948 132.327 127.404 129.031 127.480 132.318

1.719.060

Denmark 23.808 26.880 30.089 35.078 28.916 42.279 37.319 39.538 40.446 43.746 54.597 62.166 54.871 46.050 32.886 41.057 40.286 49.063 50.385

592.408

Germany (until 1990 former territory of the FRG)

35.374 42.796 46.093 49.285 53.829 57.980 33.547 33.140 37.692 46.258 53.573 66.303 69.801 64.210 45.607 52.932 64.980 70.093 70.215

708.351

Estonia : : : : : : : : : 55 57 52 65 59 39 35 37 56 62

515

Ireland 1.458 1.813 2.155 2.614 3.442 3.885 4.144 4.804 5.155 5.335 5.503 6.685 6.393 5.071 3.889 3.944 3.751 3.964 4.272

62.910

Greece : : : : : : : : : : : 5.997 6.042 6.231 5.960 5.706 4.589 2.314 2.429

39.268

Spain : : : : : : : : : : : : : : : : : : :

France 21.640 25.590 29.347 31.392 36.872 40.746 46.279 39.984 34.604 39.536 40.900 53.485 56.765 56.609 32.001 44.286 51.532 52.267 56.120

604.368

Croatia : : : : : : : 3.843 4.492 4.588 6.169 8.305 9.862 10.062 8.459 6.347 7.741 6.597 6.742

83.206

Italy 31.857 37.851 43.167 26.840 30.773 27.632 36.134 32.262 28.739 30.038 33.533 43.753 50.457 47.767 37.406 36.735 35.768 37.732 40.377

490.700

Cyprus 284 328 342 413 539 610 660 658 506 468 625 790 1.075 1.218 1.096 1.075 1.228 1.114 1.171

11.684

Latvia 68 82 112 130 124 105 140 164 138 185 258 363 570 727 292 176 285 354 370

4.021

Lithuania : : : : : : : : : 339 437 663 734 888 489 276 253 433 477

4.989

Luxembourg

990 1.072 1.226 1.330 1.328 1.533 1.651 1.926 1.892 1.571 1.753 1.680 1.977 2.003 2.075 2.311 2.148 2.257 2.213

25.458

Hungary : : : : : : : : : : : : : : : : : : :

Malta 71 57 80 72 93 127 119 125 162 128 146 171 258 295 305 322 311 362 421

3.124

Netherlands

9.963 13.045 15.468 16.249 17.215 18.140 18.800 16.530 14.502 16.266 18.735 19.978 21.049 21.179 13.293 14.589 14.046 13.697 14.074

216.738

Austria 2.760 3.779 4.103 4.470 3.881 4.526 6.923 5.247 5.200 5.607 5.766 5.964 7.069 7.468 5.114 5.810 6.470 6.679 7.251

80.568

Poland 9.306 11.294 13.967 15.586 15.924 17.853 13.961 16.010 14.804 18.124 21.057 25.468 32.324 34.485 30.716 28.125 31.649 33.863 29.351

329.937

Portugal 2.017 2.502 3.111 3.366 4.141 4.744 4.379 4.641 3.989 4.279 4.132 4.705 6.073 6.286 4.819 4.919 5.521 4.649 5.537

63.928

Romania 281 355 1.081 1.376 2.096 2.594 2.973 3.989 5.543 7.838 7.834 9.794 12.712 15.411 13.309 12.016 13.183 12.716 12.951

130.269

Slovenia 54 108 139 150 196 216 261 363 437 523 795 920 1.116 934 652 668 611 446 433

8.158

Slovakia 1.166 927 871 848 871 813 879 926 1.118 1.172 1.345 1.599 1.836 2.088 1.577 1.659 1.699 1.715 2.118

19.729

Finland : : : : : : : : : : : : : : : : : : :

Sweden 47.034 47.289 54.733 52.598 65.147 84.910 60.961 49.531 55.510 77.661 99.781 106.861 118.816 94.322 91.852 112.315 113.142 95.318 103.056

1.179.126

United Kingdom

19.569 23.885 31.063 32.664 31.072 32.295 34.777 29.467 30.257 33.307 40.381 50.089 44.899 49.463 38.013 44.091 46.143 43.210 42.219

526.316

Norway : : : : : : : : : : : : : : : : : : :

Switzerland

6.555 6.680 7.070 7.600 9.401 11.204 12.752 11.170 10.660 10.629 11.363 14.745 16.117 17.734 16.710 16.448 17.553 17.524 17.912

191.316

Net operating surplus: total economy (UOND)

Source: AMECO

Country Unit 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

mrd=billion

European Union

Mrd ECU/EUR- Standard aggregation

1850 1965 2089 2163 2205 2364 2457 2546 2602 2783 2911 3108 3328 3294 2873 3063 3174 3129 3139

Belgium Mrd EURO-BEF 50 49 51 53 53 57 56 57 59 66 71 74 79 75 68 75 78 74 75

Bulgaria Mrd BGN 0 1 10 11 10 12 13 14 14 15 17 20 24 27 26 25 30 29 28

Czech Republic Mrd CZK 486 544 565 669 688 725 804 813 854 932 1006 1119 1224 1248 1183 1174 1173 1135 1131

Denmark Mrd DKK 209 216 222 206 214 261 249 244 238 260 276 298 272 260 219 276 286 290 286

Germany Mrd EURO-DEM 419 428 449 464 457 447 476 487 486 527 549 604 646 628 519 588 622 596 602

Estonia Mrd EURO-EEK 1 1 1 1 2 2 2 2 3 3 4 4 5 4 3 4 5 5 5

Ireland Mrd EURO-IEP 19 21 26 31 36 43 49 57 59 61 64 65 70 62 56 58 65 66 64

Greece Mrd EURO-GRD 46 50 55 59 61 63 67 69 76 84 83 92 97 98 93 83 73 69 68

Spain Mrd EURO-ESP 142 150 152 163 169 183 201 215 227 237 249 266 286 291 278 264 269 273 276

France Mrd EURO-FRF 249 250 263 284 288 308 321 322 327 343 345 360 388 386 333 354 354 347 342

Croatia Mrd HRK 24 28 31 31 28 30 33 37 41 46 57 64 71 77 65 65 70 68 67

Italy Mrd EURO-ITL 363 384 393 395 407 440 465 471 485 504 501 507 528 527 482 484 492 458 467

Cyprus Mrd EURO-CYP 3 3 3 3 4 4 4 4 4 4 5 5 5 6 6 6 6 7 6

Latvia Mrd EURO-LVL 0 0 1 1 1 1 2 2 2 3 4 4 5 5 4 4 5 5 6

Lithuania Mrd EURO-LTL 2 3 4 4 4 4 5 5 6 7 8 9 10 11 8 10 12 13 13

Luxembourg Mrd EURO-LUF 5 5 5 6 7 7 6 6 7 7 8 10 10 11 9 11 12 12 12

Hungary Mrd HUF 1172 1479 2025 2454 2735 2934 3639 4383 4540 5149 5551 6194 6169 6526 5844 5913 6392 6096 6711

Malta Mrd EURO-MTL 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2

Netherlands Mrd EURO-NLG 77 80 90 97 99 108 112 113 113 119 129 144 156 161 143 152 157 149 145

Austria Mrd EURO-ATS 38 39 41 44 45 49 50 52 53 59 63 68 74 73 64 67 72 71 69

Poland Mrd PLN 105 125 153 182 200 242 245 264 282 339 364 399 448 465 536 559 619 649 672

Portugal Mrd EURO-PTE 23 24 27 29 31 32 34 34 34 37 37 39 43 43 42 43 42 42 43

Romania Mrd RON 2 4 10 11 19 25 34 43 62 85 91 118 152 182 180 194 207 220 245

Slovenia Mrd EURO-SIT 2 2 2 3 3 3 4 4 5 5 5 6 7 8 6 6 6 5 6

Slovakia Mrd EURO-SKK 6 6 7 7 8 9 10 11 12 15 16 20 23 26 22 23 23 24 24

Finland Mrd EURO-FIM 23 23 26 29 31 34 37 37 37 39 39 41 47 46 34 38 40 36 36

Sweden Mrd SEK 459 411 423 423 433 445 415 425 466 523 539 619 640 588 472 611 626 557 570

United Kingdom Mrd GBP 191 217 223 222 214 224 217 237 268 280 309 318 333 361 333 354 381 386 398

Macedonia FYR Mrd MKD NA NA NA NA NA 58 63 60 67 78 97 109 123 135 127 134 150 152 NA

Iceland Mrd ISK 100 108 132 138 122 128 164 170 158 178 168 147 188 261 349 352 357 341 365

Turkey Mrd TRY 8 14 26 48 67 105 150 212 275 343 401 471 NA NA NA NA NA NA NA

Norway Mrd NOK 256 296 319 274 317 499 501 462 499 601 731 835 821 951 723 820 919 975 961

Switzerland Mrd CHF 85 87 93 97 92 97 90 81 82 92 99 113 125 124 104 119 116 113 111

United States Mrd USD 1721 1896 2059 2154 2251 2344 2410 2517 2665 2886 3176 3483 3307 3177 3212 3563 3786 4153 4397

Japan Mrd JPY 99199 102651 102794 95196 94389 98962 98933 101736 108573 112491 108619 106808 110541 99232 85906 97918 86743 91518 91332

Canada Mrd CAD 178 186 197 194 221 257 258 264 295 325 354 360 375 403 316 378 411 406 409

Mexico Mrd MXN 1099 1586 1970 2380 2826 3347 3430 3760 4111 4836 5316 6063 6583 7168 6561 7480 8371 8999 NA

Korea Mrd WON 120758 124682 138172 138326 156302 175962 188448 214858 222243 246182 245898 249878 273347 290760 312607 362987 372685 369525 NA

Australia Mrd AUD 127 132 142 146 159 163 183 193 214 229 254 277 300 347 344 384 404 395 415

New Zealand Mrd NZD 31 32 33 33 37 40 43 45 47 50 50 51 56 51 54 59 62 60 NA

Gross operating surplus: total economy (UOGD)

Source: AMECO

Country Unit 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

European Union

Mrd ECU/EUR- Standard aggregation

2.969 3.140 3.318 3.437 3.550 3.814 3.986 4.149 4.240 4.504 4.717 5.021 5.352 5.372 4.946 5.207 5.381 5.410 5.442

Belgium Mrd EURO-BEF 82 83 87 90 92 99 100 103 107 117 124 131 139 140 135 146 151 150 153

Bulgaria Mrd BGN 0 1 11 14 13 15 16 18 19 21 23 27 33 36 36 36 40 40 38

Czech Republic Mrd CZK 821 919 995 1.143 1.194 1.268 1.378 1.400 1.463 1.573 1.673 1.823 1.988 2.060 2.024 2.024 2.037 2.014 2.036

Denmark Mrd DKK 380 393 411 402 420 476 478 484 489 521 545 578 571 587 530 593 609 624 624

Germany Mrd EURO-DEM 729 745 774 797 798 802 843 863 865 914 943 1.008 1.070 1.069 970 1.047 1.097 1.087 1.105

Estonia Mrd EURO-EEK 1 1 2 2 2 3 3 3 4 4 5 6 7 7 5 6 7 7 8

Ireland Mrd EURO-IEP 25 28 33 39 46 55 63 73 76 80 85 90 95 86 78 80 86 89 88

Greece Mrd EURO-GRD 57 63 69 75 78 81 86 90 101 110 111 121 129 133 130 121 111 106 102

Spain Mrd EURO-ESP 202 214 221 235 249 271 296 319 339 362 387 417 450 465 455 446 453 458 459

France Mrd EURO-FRF 437 443 461 488 500 535 559 571 586 614 631 664 710 729 679 708 721 724 724

Croatia Mrd HRK 44 48 54 55 54 57 67 71 78 89 97 108 119 128 119 118 123 119 118

Italy Mrd EURO-ITL 508 537 552 561 580 623 658 676 697 726 735 751 783 794 754 766 783 755 765

Cyprus Mrd EURO-CYP 4 4 4 5 5 5 6 6 6 6 7 7 7 8 8 9 9 9 9

Latvia Mrd EURO-LVL 2 2 2 3 3 3 4 4 5 6 7 8 10 11 8 8 10 11 11

Lithuania Mrd EURO-LTL 4 5 6 6 6 7 7 8 8 9 10 11 14 15 12 14 16 17 18

Luxembourg Mrd EURO-LUF 7 7 7 8 9 10 9 10 10 11 12 14 15 15 13 16 17 18 17

Hungary Mrd HUF 2.283 2.884 3.712 4.406 4.981 5.462 6.416 7.304 7.650 8.453 9.053 10.033 10.256 10.887 10.519 10.789 11.437 11.338 12.029

Malta Mrd EURO-MTL 1 1 1 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3

Netherlands Mrd EURO-NLG 129 135 147 157 163 178 188 193 197 205 218 237 253 262 247 259 264 256 253

Austria Mrd EURO-ATS 66 69 72 75 78 83 87 90 93 99 106 113 120 122 115 119 126 126 127

Poland Mrd PLN 155 188 227 268 295 346 357 379 404 468 498 542 599 620 695 722 788 828 860

Portugal Mrd EURO-PTE 37 39 42 45 48 52 55 57 58 62 63 66 72 73 72 74 73 73 73

Romania Mrd RON 4 7 16 19 31 41 58 77 104 132 145 177 219 263 269 287 312 331 364

Slovenia Mrd EURO-SIT 3 4 5 6 6 7 8 9 9 10 11 12 14 14 13 13 13 13 13

Slovakia Mrd EURO-SKK 10 11 12 13 14 16 18 19 22 25 27 31 35 38 34 37 38 39 40

Finland Mrd EURO-FIM 40 41 45 50 52 57 61 62 63 66 67 71 80 81 70 74 76 75 75

Sweden Mrd SEK 715 681 711 732 768 812 811 840 888 957 992 1.096 1.146 1.134 1.049 1.198 1.227 1.175 1.199

United Kingdom Mrd GBP 304 335 344 344 343 359 362 392 429 451 488 512 535 560 536 562 594 605 625

Macedonia FYR Mrd MKD NA NA 73 76 81 102 109 108 122 136 159 173 202 219 211 222 238 243 257

Iceland Mrd ISK 164 173 196 207 201 215 268 279 272 298 302 311 379 514 648 645 648 646 675

Turkey Mrd TRY 8 15 28 51 72 114 165 236 302 373 432 507 NA NA NA NA NA NA NA

Norway Mrd NOK 405 452 484 450 504 699 715 680 721 832 976 1.101 1.114 1.276 1.073 1.184 1.301 1.379 1.393

Switzerland Mrd CHF 167 169 175 181 180 190 187 181 185 196 205 223 241 246 230 245 244 242 243

United States Mrd USD 2.844 3.072 3.299 3.464 3.652 3.858 4.014 4.179 4.393 4.717 5.158 5.619 5.571 5.540 5.580 5.944 6.237 6.683 7.024

Japan Mrd JPY 196.872 201.568 206.239 200.125 197.931 202.213 201.538 203.585 209.023 213.116 209.966 210.752 216.950 208.186 192.933 201.697 188.540 192.133 193.203

Canada Mrd CAD 302 317 335 342 377 424 437 451 484 520 562 584 616 665 591 654 700 713 733

Mexico Mrd MXN 1.350 1.912 2.356 2.854 3.377 3.974 4.109 4.493 4.937 5.751 6.285 7.123 7.737 8.460 8.022 8.981 9.990 10.796 NA

Korea Mrd WON 193.782 210.609 238.851 252.720 278.304 303.905 324.123 358.021 375.650 410.762 421.017 435.069 471.630 499.767 531.178 595.120 625.067 636.915 NA

Australia Mrd AUD 213 220 237 246 265 278 304 321 350 376 413 451 487 548 554 605 635 638 671

New Zealand Mrd NZD 44 45 47 48 52 56 61 62 66 70 72 74 81 79 82 87 90 90 NA

Net operating surplus: total economy :- Adjusted for imputed compensation of self-employed (UQND)

Source: AMECO

Country Unit 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

European Union

Mrd ECU/EUR- Standard aggregation

NA 1.101 1.194 1.239 1.242 1.344 1.403 1.503 1.532 1.694 1.789 1.948 2.121 2.084 1.685 1.827 1.920 1.849 1.859

Belgium Mrd EURO-BEF 27 25 26 28 27 31 29 29 30 37 41 43 46 41 33 40 41 35 35

Bulgaria Mrd BGN 0 1 8 7 6 8 8 9 9 10 11 13 17 19 17 15 19 18 16

Czech Republic Mrd CZK 403 445 455 540 545 570 636 620 631 700 775 871 957 972 903 873 861 819 820

Denmark Mrd DKK 159 165 171 153 160 206 192 183 176 200 214 233 204 190 148 205 214 218 212

Germany Mrd EURO-DEM 307 312 331 344 335 322 349 357 351 388 404 456 495 475 366 431 458 428 434

Estonia Mrd EURO-EEK 1 1 1 1 1 2 2 2 2 3 3 4 4 4 2 3 4 4 4

Ireland Mrd EURO-IEP 13 15 19 23 27 33 39 47 48 49 50 51 54 44 40 44 51 52 49

Greece Mrd EURO-GRD 27 30 32 35 35 37 40 39 44 50 44 52 56 56 49 43 37 36 38

Spain Mrd EURO-ESP 86 93 97 105 110 121 135 148 158 165 174 188 204 203 193 181 187 192 193

France Mrd EURO-FRF 161 163 176 197 200 219 230 228 231 243 241 251 275 270 214 230 224 214 204

Croatia Mrd HRK NA 12 11 6 2 2 6 7 6 11 20 25 28 32 21 19 25 28 30

Italy Mrd EURO-ITL 180 189 190 191 199 223 242 239 238 245 242 238 251 243 199 192 197 164 175

Cyprus Mrd EURO-CYP 2 2 2 2 2 3 3 3 3 3 3 3 4 4 4 5 5 5 5

Latvia Mrd EURO-LVL 0 0 0 0 0 1 1 2 2 2 3 3 4 4 3 3 4 4 4

Lithuania Mrd EURO-LTL 2 2 2 2 2 3 4 4 4 5 6 6 8 9 7 8 10 11 11

Luxembourg Mrd EURO-LUF 5 5 5 5 6 6 6 6 6 6 7 9 9 9 7 9 11 11 10

Hungary Mrd HUF 618 769 1.170 1.512 1.680 1.792 2.411 3.023 3.155 3.655 4.057 4.678 4.635 4.936 4.346 4.453 4.906 4.573 5.278

Malta Mrd EURO-MTL 0,638 1 1 1 1 1 1 1 1 1 1 1 1 2 1 2 2 2 2

Netherlands Mrd EURO-NLG 45 47 56 61 62 71 74 73 72 76 84 96 104 106 86 95 96 85 79

Austria Mrd EURO-ATS 23 24 25 27 28 31 32 33 34 39 43 47 53 51 42 45 49 47 45

Poland Mrd PLN 46 50 65 85 95 125 117 135 158 214 238 273 315 320 387 400 451 479 500

Portugal Mrd EURO-PTE 13 12 14 15 16 16 17 18 17 20 20 22 26 25 25 26 26 26 27

Romania Mrd RON 0 1 4 1 3 -2 -7 10 16 42 34 57 82 92 89 95 118 130 154

Slovenia Mrd EURO-SIT 0 0 1 1 1 1 1 2 2 2 2 3 4 4 2 2 2 1 1

Slovakia Mrd EURO-SKK 5 5 6 6 7 7 9 9 10 13 13 17 20 21 17 18 18 19 19

Finland Mrd EURO-FIM 15 15 18 21 22 25 28 28 27 29 29 30 36 34 22 26 26 23 23

Sweden Mrd SEK 398 347 356 357 363 371 341 351 395 447 461 536 551 500 381 515 532 461 474

United Kingdom Mrd GBP 132 156 161 158 147 155 144 161 183 190 215 217 223 249 218 231 254 252 260

Macedonia FYR Mrd MKD NA NA NA NA NA 42 46 39 44 59 79 87 101 109 100 104 120 122 NA

Iceland Mrd ISK NA NA NA NA NA 46 80 81 82 93 72 30 65 140 244 236 231 208 221

Turkey Mrd TRY 5 9 16 31 36 64 89 133 177 248 303 365 NA NA NA NA NA NA NA

Norway Mrd NOK 212 252 273 225 267 447 447 406 441 540 668 768 750 877 647 744 839 893 873

Switzerland Mrd CHF 49 49 52 55 50 56 47 39 42 53 60 72 81 79 61 76 71 68 69

United States Mrd USD 1.321 1.483 1.629 1.709 1.797 1.858 1.914 2.017 2.128 2.314 2.585 2.860 2.669 2.543 2.584 2.923 3.145 3.493 3.741

Japan Mrd JPY 34.182 38.465 37.777 31.529 33.375 40.070 42.533 48.317 57.069 61.346 58.248 59.666 65.009 55.381 45.148 58.287 47.718 53.204 53.341

Canada Mrd CAD 127 131 137 129 155 191 194 198 227 255 280 284 293 320 231 292 323 314 313

Mexico Mrd MXN 838 1.267 1.551 1.873 2.209 2.636 2.621 2.885 3.160 3.811 4.246 4.931 5.365 5.866 5.237 6.049 6.874 7.404 NA

Korea Mrd WON 8.683 -3.451 1.651 -838 13.104 23.716 22.738 37.008 37.453 54.681 43.104 41.600 59.371 71.082 97.914 146.232 148.198 133.738 NA

Australia Mrd AUD 80 84 91 95 105 107 125 132 151 162 184 205 222 268 261 295 316 304 321

New Zealand Mrd NZD 26 27 28 29 32 36 39 40 43 45 44 45 49 44 47 51 54 53 NA

Compensation of Employees (current prices, million euros)

Source: Eurostat, national accounts

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

European Union (28 countries)

: : : : : 4.612.485 4.816.709 4.979.961 5.041.743 5.234.578 5.440.468 5.717.339 6.032.869 6.145.763 5.967.319 6.137.807 6.269.771 6.430.451 6.471.262 6.673.346

Belgium 111.193 111.245 112.051 115.797 122.667 128.289 135.404 140.632 143.323 147.463 152.557 160.053 168.757 178.091 179.532 183.069 191.331 197.997 202.063 204.669

Bulgaria 4.325 2.958 3.158 4.691 4.770 5.095 5.658 6.013 6.495 7.075 8.016 8.886 10.432 12.477 13.201 13.875 14.588 15.432 16.601 16.818

Czech Republic 17.868 21.142 22.190 23.222 23.367 25.708 29.014 34.443 35.125 38.017 43.624 49.186 54.500 64.814 59.337 62.848 66.114 65.908 63.820 62.122

Denmark 70.783 74.208 76.533 80.757 85.512 88.851 93.518 97.188 99.737 102.554 107.482 113.816 121.150 127.390 127.001 128.056 129.718 131.494 132.977 136.578

Germany (until 1990 former territory of the FRG)

1.056.987 1.046.639 1.021.963 1.041.238 1.078.593 1.120.526 1.137.729 1.144.758 1.146.217 1.148.422 1.145.877 1.165.287 1.197.070 1.241.273 1.245.663 1.281.963 1.336.659 1.387.626 1.426.227 1.479.673

Estonia : : : : : 2.787 3.107 3.440 3.861 4.292 4.943 5.940 7.397 8.238 7.153 6.957 7.458 8.048 8.708 9.468

Ireland : : : 32.582 36.635 41.592 46.486 49.920 54.317 59.008 65.922 72.554 79.555 82.649 75.253 70.039 70.076 70.136 72.484 76.505

Greece 30.693 33.286 37.420 39.026 43.626 44.449 47.318 54.486 59.210 63.735 68.210 72.756 78.201 82.393 84.433 81.035 73.466 66.371 59.306 59.887

Spain 224.052 241.231 252.070 267.080 288.624 313.263 337.835 360.690 386.223 411.320 444.044 481.152 522.556 559.777 549.173 541.475 531.879 501.909 490.253 496.870

France 625.525 646.126 650.915 676.743 712.455 751.506 785.431 817.774 841.720 871.162 903.162 942.012 979.930 1.010.192 1.013.013 1.040.212 1.068.929 1.092.356 1.107.016 1.125.630

Croatia 7.891 8.920 10.059 11.171 11.261 11.968 12.473 13.984 15.078 16.158 17.499 18.974 20.816 22.919 22.337 21.844 21.478 21.048 20.612 20.502

Italy 346.607 402.016 427.409 423.148 440.026 457.998 482.890 505.318 526.367 545.614 569.286 594.753 617.212 639.168 634.815 642.342 651.471 643.056 636.317 641.924

Cyprus 3.065 3.238 3.513 3.704 3.951 4.293 4.559 4.922 5.376 5.749 6.160 6.610 7.021 7.543 7.709 7.935 8.174 7.848 6.977 6.503

Latvia 1.696 2.088 2.459 2.667 3.009 3.554 3.755 3.871 4.006 4.453 5.499 7.110 9.925 11.475 8.541 7.503 7.938 8.649 9.596 10.276

Lithuania : : : : : : : : : 7.310 8.520 10.277 12.326 14.355 11.978 11.470 12.296 12.978 13.696 14.583

Luxembourg : : : : : 10.554 11.530 12.385 12.762 13.584 14.459 15.681 17.200 18.444 18.899 19.647 20.651 21.477 22.680 :

Hungary 16.054 16.352 18.368 19.003 19.709 22.569 26.628 32.063 34.183 37.722 41.286 41.339 46.519 49.067 42.438 43.522 44.482 43.756 44.104 45.123

Malta 1.345 1.411 1.559 1.616 1.724 1.908 2.059 2.101 2.126 2.183 2.226 2.365 2.503 2.669 2.736 2.845 3.036 3.206 3.363 3.539

Netherlands 172.923 176.191 180.033 192.316 208.602 225.800 238.391 250.067 256.910 260.672 264.776 274.119 290.933 307.355 311.679 310.471 318.040 322.825 323.635 328.547

Austria 93.864 93.258 92.229 95.494 99.729 103.345 105.585 107.547 109.981 112.748 116.421 122.035 128.190 134.961 136.224 138.905 144.343 150.379 154.729 158.750

Poland : : : : : : : 84.434 75.327 75.749 89.995 99.699 114.236 140.140 118.226 135.390 139.164 143.033 146.805 :

Portugal 42.592 45.838 49.059 52.790 57.084 61.825 65.404 68.428 70.139 72.332 75.737 77.843 81.028 83.639 83.625 84.842 81.617 75.305 76.058 76.381

Romania 10.739 11.009 10.200 14.108 11.635 15.999 18.691 19.243 19.620 22.473 31.207 37.494 45.898 55.905 45.516 45.057 43.751 43.779 45.451 47.012

Slovenia 8.886 8.971 9.347 9.895 10.418 11.061 11.829 12.531 13.075 13.847 14.620 15.653 17.212 18.956 18.790 19.020 18.913 18.475 18.259 18.293

Slovakia 5.982 6.889 8.093 8.474 7.831 8.979 9.360 10.295 11.445 12.527 14.326 16.312 19.845 23.315 24.001 24.913 26.053 26.870 27.417 28.963

Finland 49.584 50.593 52.833 55.995 59.731 63.556 67.170 69.285 70.968 73.934 77.780 81.733 86.299 91.983 90.940 92.404 96.828 100.288 100.906 101.353

Sweden 88.916 103.338 106.329 103.289 110.892 126.845 123.664 129.259 134.338 138.778 141.022 148.271 159.898 161.411 146.175 167.826 187.469 202.245 209.059 206.283

United Kingdom 464.978 496.202 620.808 690.546 757.255 878.375 916.441 939.089 897.376 965.696 1.005.815 1.075.429 1.136.263 995.163 888.933 952.343 953.851 1.047.545 1.031.390 1.121.520

Iceland : : 3.243 3.792 4.394 5.178 4.758 5.193 5.447 5.930 7.422 7.770 8.824 5.763 4.374 4.833 5.275 5.667 5.976 6.737

Norway 53.374 57.830 64.109 66.792 72.697 78.730 84.264 94.582 91.219 91.541 101.654 110.550 123.310 132.179 128.257 143.814 157.193 175.083 177.306 173.256

Switzerland 149.520 148.197 143.196 147.801 152.600 163.625 178.610 188.866 182.946 181.182 186.317 190.783 192.388 209.340 225.325 248.138 288.927 303.258 304.936 :

Former Yugoslav Republic of Macedonia, the

: : : : : 1.761 1.709 1.714 1.795 1.754 1.727 1.926 1.939 2.268 2.430 2.543 2.635 2.653 2.733 :

Albania : : : : : : : : : : : : : : : : : : : :

Serbia : : : : : : : : : : : : : : : : : : : :

United States : : : : : : : : : : : : : : : : : : : :

Special value:

: not available

Gross Value Added (current price, euro millions)

Source: eurostat, natinal accounts

GEO/TIME 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

European Union (28 countries)

: : : : : 8546961,6 8923711,3 9261329,6 9417273,9 9881807,2 10298927,1 10873022,4 11531243,4 11656145,6 11035242,5 11476232,4 11794483,4 12015275,9 12100788,2 12447427,7

Belgium 199545,6 198739,3 200924,2 207965,4 217620 229856 238051 246070 253445 266687 278141 292505 308295 317981 313494 327215 340384 347328 353824 359839

Bulgaria 9919,5 7265,1 9079,7 11675,5 11403 12774,3 14142,6 15501,5 16351,8 17858,8 20008,5 22553,6 26970,2 30538,5 31156,5 31756,1 34921,4 35216,1 35344,3 36131,6

Czech Republic 41496,2 47826,3 49643,1 54339,2 55220,6 60899,4 68800,2 79574,9 80620,2 86948,2 99035,1 112603,7 125097,7 146200,3 134411,7 141705 147890,5 144901,5 141059,5 140234,6

Denmark 122457 127254,6 131494,8 134755,9 142453,2 153361,1 158494,7 163060 166313,3 173462,3 180923,1 191592,4 198028,7 206750,1 198357,8 208191,7 212102,6 215994,2 217968,3 222415,4

Germany (until 1990 former territory of the FRG)

1795315 1787299,6 1774842,6 1814338,8 1858963 1906252 1966887 1995330 2002029 2054583 2079023 2161896 2258193 2300939 2203589 2317328 2424083 2470199 2525612 2611313

Estonia : : : : : 5512,7 6214,3 6900,5 7762,7 8594,6 9971,2 11887,2 14254,9 14715,6 12276,4 12871,8 14356,7 15382 16404,2 16966,3

Ireland 47428,4 52732,2 64676,1 72289,6 82218,4 96227 108124,3 120053,8 128464 137024,3 148795,4 161711,4 175489,3 167752,7 151362,6 151446,9 157838,6 159201,4 160543,1 169844,7

Greece 95494,5 104349,4 114001,5 116859,9 125424,5 127215,9 134396,6 144669,7 160239,5 174070,1 178707,5 193030,5 205392,6 213932,6 212216 199645,4 182302,4 171215,6 160544,5 157212,5

Spain 433595,7 465806,2 476731,7 503160,1 538938 586321 636824 682380 727685 776193 834247 900092 972855 1025672 1006122 989913 988289 969336 958471 965110

France 1103198,8 1135066,6 1151694,2 1206352 1258638 1333059 1390445 1436649 1476006 1539431 1592159 1659580 1746821 1796275 1752722 1800982 1849498 1873450 1899320 1910231

Croatia 14441,5 15989 17803,6 18947,1 18448,1 19634,7 21606,8 23764,5 25696,4 28279,1 30896,3 34021,8 37372,7 41094,9 38916,4 38477,3 38406,7 37266,1 36896,6 36452,3

Italy 809121,5 934336,6 986062,3 1014810,7 1049193,3 1110690,8 1172236,7 1214839,2 1258448,8 1308387 1344306,4 1387889 1446518,9 1473827,4 1422428,1 1444426,4 1471728,5 1449887,2 1448863,2 1450836,6

Cyprus 6963,1 7266,6 7792,5 8521,6 9173,1 9955,9 10631,4 10992,4 11616,6 12558,9 13500 14522,6 15569,8 16726,9 16723 17344,6 17876,8 17772,6 16685,1 15980,2

Latvia 3658,3 4153,3 5064,1 5601,7 6207,7 7582,7 8306,5 9028,8 9297,3 10379,5 12116,4 15143,4 20034,9 21735 16648,2 15618,6 17705,5 19388,3 20252,1 20851,3

Lithuania : : : : : : : : : 16499,3 19009,7 21733,7 26076,5 29349,2 24300,4 25184,9 28132,8 30132,4 31648,6 32776,3

Luxembourg : : : : : 20743,3 21146,2 22296 23162,7 24583,4 26548,7 29982,3 32222 33766 32412,8 35548,4 38217,3 39337,9 40459,5 :

Hungary 29868,4 31225,3 35890,6 37315,5 39440,7 43606,2 51649,3 62053,6 64342,9 71005,3 77430 78867,7 86923,8 91645,6 79225,5 82675,5 85150,8 82831,4 84640,6 86729,3

Malta 2517,5 2708,3 2987,8 3221,3 3428,3 3916,1 4026 4192,9 4254,3 4258,9 4465,4 4681,6 5019,3 5384,4 5356,9 5790,8 6011 6318,5 6584,3 6881,6

Netherlands 309596,6 316812,5 327422,8 347393,9 371805 401992 424604 441588 452900 467539 486403 515986 547518 570887 553689 567757 579590 583832 586734 596655

Austria 165312,3 166723,8 166883,3 173336,1 180719,1 190177,3 196609,8 201881,9 206344,2 215210,7 224777,3 237683,3 251926,3 260532,9 254762,7 261891,7 274896,9 282051,8 287272,6 292960

Poland 95879,5 110821,9 123850,7 137242,7 140057,2 165378,7 188787,3 185350 169382,4 181052,6 214964 239485,9 273714,6 317494,4 279540,6 316895,9 331413,4 342168,4 351914,5 366780,1

Portugal 80207,8 84870 90925,6 96795 104255,2 112568 119144,9 124793,2 127819 133269,8 137599,4 143579,4 152183,2 156016,4 155505,9 158325,9 154242,8 147361,6 148607,1 151190,4

Romania 27113,5 27633 29414,4 33425 30242,9 36656,5 40955,8 43983,1 47129,1 54878 70912,5 86965,7 110871,3 126845,8 108475,7 113249,3 116966,4 117507,3 127271,8 132553,8

Slovenia 13972,2 14565,2 15946,5 17138,5 18295,9 19152,7 20398,6 21887,8 23029,8 24339,8 25689,5 27739,7 30808,7 33229,8 31638,3 31571,2 32107,8 31258,5 31226,6 32172,3

Slovakia 13710 15322,4 17468,2 18235,9 17552,1 19955,3 21620,1 23847,1 27033,7 31122,7 35035 41079,4 50656,2 59700,5 58079,1 61223,1 63581,9 66090,8 67142,8 68471,4

Finland 89939,8 90969,7 97127,3 104035,5 110435 119200 127111 130021 132243 138752 143621 150475 163654 170386 158348 163620 170454 172417 173741 175621

Sweden 176547,4 199370,6 205718,4 209339,2 223589,4 249109,2 236333,7 247218,1 258694,1 271467,5 275627,9 295107,7 314354,8 311174,9 271942,5 324493 356921,6 373843,9 385621,1 380760,9

United Kingdom 849007,4 925135 1137340 1219987,5 1300834,9 1494902,2 1524744,7 1588685,3 1540880,6 1655080,6 1739064,1 1846895,4 1940474 1718889,1 1509693,1 1632803,3 1661056,8 1820203 1795862,3 1977282,5

Iceland : : 5734,7 6442,2 7061,4 8224,2 7890,8 8500,7 8646,1 9421,1 11373 11388,2 13257,8 9404,4 8175 8875,6 9351,6 9752,5 10197,7 :

Norway 100799,9 111633,5 123475,9 118743,1 132160,5 163864 171696,2 183325,7 179313,8 189047,9 221549,3 245600,3 260094,7 285120,6 248449,2 288150,5 320388,9 355419,2 351916,9 337632,9

Switzerland 253092,6 251810,9 244766,2 254830,6 260738 280983,9 297993,5 307385,2 299649,5 304522,1 315060,9 328627,7 335260,1 362113,5 374831,4 422948,8 483648,5 500796 498865,3 :

Former Yugoslav Republic of Macedonia, the

: : : : : 3451,6 3509,6 3496,4 3789,9 3972,9 4320,7 4757,4 5253,6 5805,4 5847,9 6131,4 6496 6561,5 7091,6 :

Albania : : : : : : : : : : : : : : : : : : : :

Serbia : : : : : : : 14666,3 15863 16800,4 17608,7 20296,1 24448,2 28337,5 25683,8 24818,4 28144,3 26559,1 28845,7 27804,3

United States : : : : : : : : : : : : : : : : : : : :

Operating surplus and mixed income, gross (Current prices, million euro)

Source: eurostat, national accounts

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

European Union (28 countries)

: : : : : 3.814.214 3.985.374 4.149.305 4.240.386 4.503.728 4.716.916 5.021.285 5.352.374 5.372.317 4.946.375 5.206.935 5.381.296 5.401.767 5.442.032 5.584.864

Belgium 86.192 85.486 86.264 89.721 92.369 99.013 99.955 102.768 107.279 116.647 123.911 131.444 139.425 140.223 134.797 145.944 151.081 150.182 153.094 156.594

Bulgaria 5.590 4.303 5.930 7.002 6.611 7.636 8.443 9.407 9.777 10.695 11.878 13.570 16.705 18.336 18.231 18.187 20.621 20.251 19.549 19.582

Czech Republic 23.655 26.677 27.687 31.706 32.364 35.621 40.447 45.462 45.952 49.328 56.189 64.326 71.592 82.560 76.574 80.050 82.821 80.089 78.377 79.481

Denmark 51.831 53.395 54.935 53.608 56.482 63.896 64.093 65.153 65.764 70.047 73.094 77.496 76.595 78.744 71.153 79.559 81.740 83.790 83.685 84.375

Germany (until 1990 former territory of the FRG)

760.564 762.606 770.524 791.240 797.952 801.845 843.339 862.680 865.345 913.739 942.648 1.007.814 1.069.744 1.068.675 970.275 1.047.289 1.096.500 1.087.199 1.104.556 1.137.554

Estonia : : : : : 2.691 3.067 3.423 3.854 4.297 5.033 5.953 6.891 6.519 5.161 6.027 7.017 7.456 7.836 7.580

Ireland : : : 39.972 45.930 54.962 62.313 70.559 74.462 78.126 83.900 89.972 96.620 85.767 76.627 81.703 88.066 89.097 87.762 93.069

Greece 64.351 70.594 76.076 77.235 81.094 82.136 86.489 89.762 100.656 109.832 110.559 121.355 128.835 133.143 129.548 120.553 110.750 106.205 102.202 95.038

Spain 206.434 221.601 221.844 233.770 248.589 270.834 296.172 319.075 339.380 362.133 386.878 417.480 450.170 465.182 455.174 445.879 453.354 458.324 458.590 458.068

France 439.744 447.775 456.991 484.682 500.024 534.600 559.472 571.259 585.507 614.214 631.087 664.325 709.868 728.531 678.528 708.464 721.230 718.004 723.851 723.445

Croatia 6.502 7.053 7.730 7.762 7.096 7.508 8.956 9.540 10.371 11.835 13.106 14.726 16.186 17.753 16.162 16.208 16.502 15.790 15.615 15.309

Italy 461.633 530.290 554.064 558.836 580.033 623.154 658.066 675.683 697.051 726.467 734.502 750.758 783.014 793.930 754.053 765.591 782.865 754.857 765.267 759.880

Cyprus 3.767 3.890 4.114 4.586 4.947 5.365 5.756 5.756 5.725 6.150 6.617 7.083 7.488 8.244 8.188 8.520 8.807 9.065 8.847 8.531

Latvia 1.931 2.033 2.532 2.845 3.114 3.956 4.440 5.097 5.225 5.858 6.631 8.077 10.222 10.535 8.310 8.313 9.920 10.958 10.867 10.644

Lithuania : : : : : : : : : 9.137 10.495 11.459 13.751 14.930 12.271 13.651 15.757 17.071 17.866 18.036

Luxembourg : : : : : 9.851 9.260 9.669 10.193 10.742 11.771 13.868 14.554 14.994 13.226 15.519 17.207 17.517 17.363 :

Hungary 13.873 14.887 17.536 18.316 19.704 21.003 25.004 30.063 30.165 33.590 36.497 37.966 40.802 43.285 37.524 39.163 40.939 39.198 40.520 41.578

Malta 1.189 1.310 1.446 1.621 1.720 2.018 1.971 2.124 2.160 2.100 2.266 2.339 2.534 2.723 2.632 2.962 2.989 3.142 3.250 3.392

Netherlands 136.473 140.991 148.086 156.606 164.645 177.410 188.324 193.876 197.597 208.665 222.776 242.797 257.290 265.723 247.083 259.005 263.698 261.721 262.952 265.769

Austria 68.688 70.259 71.259 74.724 77.781 83.339 86.949 90.174 92.521 99.211 105.611 112.697 120.351 121.859 114.784 119.036 125.696 126.486 126.789 128.292

Poland : : : : : : : 98.352 91.899 103.308 123.851 139.132 158.275 176.617 160.689 180.648 191.242 197.952 204.806 :

Portugal 38.092 39.883 42.626 44.973 48.461 51.502 54.624 56.954 57.722 61.693 62.735 66.379 71.705 72.635 72.250 74.260 73.231 72.634 72.922 75.006

Romania 16.353 16.711 19.366 19.472 18.727 20.586 22.262 24.700 27.599 32.684 39.915 50.205 65.528 71.466 63.543 68.180 73.628 74.321 82.303 86.009

Slovenia 5.278 5.675 6.569 7.169 7.749 7.877 8.294 9.077 9.625 10.114 10.677 11.852 13.548 14.422 13.324 13.047 13.413 12.971 13.147 13.963

Slovakia 7.818 8.445 9.545 9.834 9.796 11.156 12.330 13.494 15.636 18.822 20.853 24.855 30.926 36.850 34.410 36.691 37.650 39.169 39.693 39.568

Finland 42.142 41.701 45.585 49.355 52.038 57.088 61.342 62.125 62.647 66.331 67.496 70.929 79.578 80.759 69.867 73.752 76.166 74.698 75.182 76.609

Sweden 76.609 80.018 82.216 82.087 87.177 96.115 87.597 91.746 97.317 104.915 106.909 118.472 123.875 117.890 98.773 125.626 135.887 134.994 138.608 137.129

United Kingdom 366.947 411.660 496.684 508.487 520.693 589.842 582.337 622.707 619.558 664.792 713.152 750.403 782.471 703.638 601.635 654.831 684.164 745.663 735.954 818.255

Iceland : : 2.441 2.598 2.610 2.969 3.071 3.242 3.135 3.425 3.861 3.545 4.328 3.573 3.750 3.987 4.017 4.019 4.157 4.514

Norway 48.881 55.149 60.329 53.165 60.592 86.154 88.798 90.552 90.052 99.361 121.820 136.761 138.970 155.152 122.968 147.886 166.905 184.525 178.446 168.040

Switzerland 108.052 107.813 106.283 111.300 112.416 121.746 124.069 123.359 121.538 127.177 132.509 141.693 146.602 154.851 151.999 177.422 197.881 201.131 197.536 :

Former Yugoslav Republic of Macedonia, the

: : : : : 1.687 1.793 1.778 1.990 2.214 2.588 2.825 3.306 3.562 3.450 3.612 3.876 3.943 4.409 :

Weight Matrix 5 yr avrg 2009-2013 - Gross Operating Surplus and mixed income

Source: own calcs

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

European Union (28 countries)

Belgium 0,18 0,20 0,21 0,20 0,21

Bulgaria 0,19 0,19 0,21 0,21 0,20

Czech Republic 0,19 0,20 0,21 0,20 0,20

Denmark 0,18 0,20 0,20 0,21 0,21

Germany (until 1990 former territory of the FRG) 0,18 0,20 0,21 0,20 0,21

Estonia 0,15 0,18 0,21 0,22 0,23

Ireland 0,18 0,19 0,21 0,21 0,21

Greece 0,23 0,21 0,19 0,19 0,18

Spain 0,20 0,20 0,20 0,20 0,20

France 0,19 0,20 0,20 0,20 0,20

Croatia 0,20 0,20 0,21 0,20 0,19

Italy 0,20 0,20 0,20 0,20 0,20

Cyprus 0,19 0,20 0,20 0,21 0,20

Latvia 0,17 0,17 0,21 0,23 0,22

Lithuania 0,16 0,18 0,21 0,22 0,23

Luxembourg 0,16 0,19 0,21 0,22 0,21

Hungary 0,19 0,20 0,21 0,20 0,21

Malta 0,18 0,20 0,20 0,21 0,22

Netherlands 0,19 0,20 0,20 0,20 0,20

Austria 0,19 0,19 0,21 0,21 0,21

Poland 0,17 0,19 0,20 0,21 0,22

Portugal 0,20 0,20 0,20 0,20 0,20

Romania 0,18 0,19 0,20 0,21 0,23

Slovenia 0,20 0,20 0,20 0,20 0,20

Slovakia 0,18 0,20 0,20 0,21 0,21

Finland 0,19 0,20 0,21 0,20 0,20

Sweden 0,16 0,20 0,21 0,21 0,22

United Kingdom 0,18 0,19 0,20 0,22 0,22

Iceland 0,19 0,20 0,20 0,20 0,21

Norway 0,15 0,18 0,21 0,23 0,22

Switzerland 0,16 0,19 0,21 0,22 0,21

Former Yugoslav Republic of Macedonia, the 0,18 0,19 0,20 0,20 0,23

Weight Matrix 13 yr avrg 2000-2012 - Gross Operating Surplus and mixed income

Source: own calcs

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

European Union (28 countries) 0,06 0,06 0,07 0,07 0,07 0,08 0,08 0,09 0,09 0,08 0,08 0,09 0,09 0,09

Belgium 0,06 0,06 0,06 0,07 0,07 0,08 0,08 0,08 0,09 0,08 0,09 0,09 0,09 0,09

Bulgaria 0,04 0,05 0,05 0,05 0,06 0,06 0,07 0,09 0,10 0,10 0,10 0,11 0,11 0,11

Czech Republic 0,04 0,05 0,06 0,06 0,06 0,07 0,08 0,09 0,10 0,09 0,10 0,10 0,10 0,10

Denmark 0,07 0,07 0,07 0,07 0,07 0,08 0,08 0,08 0,08 0,07 0,08 0,09 0,09 0,09

Germany (until 1990 former territory of the FRG) 0,06 0,07 0,07 0,07 0,07 0,07 0,08 0,09 0,08 0,08 0,08 0,09 0,09 0,09

Estonia 0,04 0,05 0,05 0,06 0,06 0,07 0,09 0,10 0,10 0,08 0,09 0,10 0,11 0,12

Ireland 0,05 0,06 0,07 0,07 0,08 0,08 0,09 0,09 0,08 0,07 0,08 0,09 0,09 0,09

Greece 0,06 0,06 0,06 0,07 0,08 0,08 0,08 0,09 0,09 0,09 0,08 0,08 0,07 0,07

Spain 0,05 0,06 0,06 0,07 0,07 0,08 0,08 0,09 0,09 0,09 0,09 0,09 0,09 0,09

France 0,06 0,07 0,07 0,07 0,07 0,07 0,08 0,08 0,09 0,08 0,08 0,09 0,09 0,09

Croatia 0,04 0,05 0,05 0,06 0,07 0,08 0,08 0,09 0,10 0,09 0,09 0,09 0,09 0,09

Italy 0,07 0,07 0,07 0,07 0,08 0,08 0,08 0,08 0,08 0,08 0,08 0,08 0,08 0,08

Cyprus 0,06 0,06 0,06 0,06 0,07 0,07 0,08 0,08 0,09 0,09 0,09 0,09 0,10 0,10

Latvia 0,04 0,05 0,05 0,05 0,06 0,07 0,08 0,10 0,11 0,09 0,09 0,10 0,11 0,11

Lithuania #VALUE! #VALUE! #VALUE! #VALUE! 0,08 0,09 0,10 0,12 0,13 0,10 0,12 0,13 0,14 0,15

Luxembourg 0,06 0,05 0,06 0,06 0,06 0,07 0,08 0,09 0,09 0,08 0,09 0,10 0,10 0,10

Hungary 0,05 0,05 0,07 0,07 0,07 0,08 0,08 0,09 0,10 0,08 0,09 0,09 0,09 0,09

Malta 0,06 0,06 0,07 0,07 0,07 0,07 0,07 0,08 0,09 0,08 0,09 0,09 0,10 0,10

Netherlands 0,06 0,06 0,06 0,07 0,07 0,07 0,08 0,09 0,09 0,08 0,09 0,09 0,09 0,09

Austria 0,06 0,06 0,06 0,07 0,07 0,08 0,08 0,09 0,09 0,08 0,09 0,09 0,09 0,09

Poland #VALUE! #VALUE! 0,06 0,06 0,06 0,08 0,09 0,10 0,11 0,10 0,11 0,12 0,12 0,13

Portugal 0,06 0,06 0,07 0,07 0,07 0,07 0,08 0,08 0,09 0,09 0,09 0,09 0,09 0,09

Romania 0,03 0,04 0,04 0,04 0,05 0,06 0,08 0,10 0,11 0,10 0,11 0,12 0,12 0,13

Slovenia 0,05 0,06 0,06 0,06 0,07 0,07 0,08 0,09 0,10 0,09 0,09 0,09 0,09 0,09

Slovakia 0,03 0,04 0,04 0,05 0,06 0,06 0,07 0,09 0,11 0,10 0,11 0,11 0,12 0,12

Finland 0,06 0,07 0,07 0,07 0,07 0,07 0,08 0,09 0,09 0,08 0,08 0,08 0,08 0,08

Sweden 0,07 0,06 0,06 0,07 0,07 0,07 0,08 0,09 0,08 0,07 0,09 0,09 0,09 0,10

United Kingdom 0,07 0,07 0,07 0,07 0,08 0,08 0,09 0,09 0,08 0,07 0,08 0,08 0,09 0,08

Iceland 0,06 0,07 0,07 0,07 0,07 0,08 0,08 0,09 0,08 0,08 0,08 0,09 0,09 0,09

Norway 0,05 0,05 0,06 0,06 0,06 0,07 0,08 0,09 0,10 0,08 0,09 0,10 0,11 0,11

Switzerland 0,06 0,06 0,06 0,06 0,07 0,07 0,07 0,08 0,08 0,08 0,09 0,10 0,10 0,10

Former Yugoslav Republic of Macedonia, the 0,05 0,05 0,05 0,05 0,06 0,07 0,08 0,09 0,10 0,09 0,10 0,11 0,11 0,12

ECU-EUR exchange rates (annual averages) :- Units of national currency per EUR/ECU (XNE)

Country Unit 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Belgium