The CCCTB Proposal and Norway: Profit shifting, investments and implications for Norwegian Government behaviour

Ingeborg Skjerpe

Student thesis: Master thesis


Intra-firm trade between related parties of an MNE comprise increasingly larger share of world trade. Still, the system of international taxation calculates the tax burden of such companies on the basis of separate accounting. This means that even though the foundation of the MNE is affiliation between parties, transaction s between such must be determine on an arm’s length basis. Several issues arise due to separate accounting of MNEs. Profit shifting through transfer pricing, relocation of investments, administrative cost and compliance costs are the main focus of this thesis. To alleviate parts of these issues and contribute to increased economic efficiency in the EU, the European Commission presented the CCCTB proposal in 2011. This entails a shift from separate accounting to formula apportionment with a three-factor formula of sales, labour and assets and common rules on the calculation of the tax base. By focusing on European and Norwegian MNEs and their decision to shift profits through transfer pricing and relocate investments I try to assess the implications of the CCCTB. I further seek to analyse how the Norwegian government will react to possible changes by these MNEs. I use primary expert interviews combined with secondary literature analysis of research on FA unions with a Water’s edge to assess the development of the CCCTB for the MNEs. Results from the analysis is ambiguous in the way that several factors impact the future consequence of the CCCTB. However, it seems likely that profit shifting from Norway into the CCCTB will continue compared to the current case but at a lower scale. Further, investments in the CCCTB might be seen as more attractive than in Norway due to the possibility of reduced costs as well as possibilities of intra-CCCTB consolidation. Reduced profit shifting into the CCCTB represents an increase in Norwegian welfare whereas the possibility of increased investments in the CCCTB at the expense of Norwegian investments affects Norwegian welfare negatively. It is difficult to assess the potential reaction to this by the Norwegian government but both theoretical contributions and the expert interviews emphasize that a full inclusion of Norway into the CCCTB is not very likely in the near future due to the massive alteration of the tax system as well as the deprivation of taxation as a political tool.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
Publication date2012
Number of pages106