Deductibility of Provisions under the CCCTB Proposal and Its Effects on Companies: The Case of Poland

The aim of the paper is to empirically examine the scale and the distribution of the tax advantage which emerges when provisions for future liabilities are deductible from taxable earnings, as proposed in the CCCTB concept. The paper concentrates on Poland - a country for which the expected economic effects of this proposal are still controversial and ambiguous. The results are also relevant for other European countries in which provisions are currently treated in a different way for financial and for tax accounting purposes. The analysis is based on the information from financial statements of 250 companies from the period 2007 - 2012. The microsimulation method in a multi-period setting is implemented. The results show that in case provisions are deductible for tax purposes the tax due decreases by 5,6 % or and by 9,8 % on average, depending on the liquidity situation of companies. The tax advantage is distributed differently among companies. The majority of taxpayers is expected to gain from the reform. Only for single companies there is an increase in tax, induced by the existing, restricted tax loss carry forward rules. The median change in CIT amounts to -1 % and -2 %.