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A progressive excess profit tax for the European Union

A progressive excess profit tax for the European Union

Heck, Ines ORCID: 0000-0001-7940-4064 , Rabensteiner, Thomas and Tippet, Benjamin ORCID: 0000-0003-4704-5735 (2024) A progressive excess profit tax for the European Union. [Working Paper]

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Abstract

Executive Summary
• This report proposes a new progressive excess profit tax (PEPT) for the European Union. Our proposal taxes excess profits at:
• an additional 20% rate for ‘base’ excess profits – profits between a rate of return of 10% and 15%
• and an additional 40% rate for ‘super’ excess profits – profits above a rate of return of 15%
• This PEPT design would raise an additional €126 billion in 2022 on top of existing corporate tax revenues. This is equivalent to roughly 0.8% of the EU’s GDP or about 1.6% of total government expenditure by EU member states. This translates to €280 for every EU citizen.
• EU member states could levy the PEPT as they have the necessary tools, information and legal authority to collect taxes, with coordination at the European level.
• Our proposal limits tax avoidance: firms are taxed based on where they generate sales, not where they are legally registered, limiting their ability to shift profits to low-tax jurisdictions to avoid the tax.
• Our proposal should not reduce investment as firms can still make 10% returns on their assets without facing any extra taxes.
• Even if global coordination is not possible, we show that a PEPT can be unilaterally implemented by the EU.

Item Type: Working Paper
Uncontrolled Keywords: excess profits; corporate taxation; destination based taxation
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HJ Public Finance
Faculty / School / Research Centre / Research Group: Faculty of Business
Last Modified: 20 Feb 2024 14:09
URI: http://gala.gre.ac.uk/id/eprint/45941

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