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EU plans to re-launch bid for common corporate tax base

The European Commission is putting together a plan for 'fairer and more growth friendly tax systems in Europe', including a re-launch of work on a Common Consolidated Corporate Tax Base (CCCTB). 29 May 2015

A new approach to corporate tax is needed to "address tax abuse, ensure sustainable revenue and foster a better business environment", the Commission said in a statement. The fight against tax evasion and avoidance is a top priority of this Commission, it said.

"The key objective is to ensure that companies are taxed where their profits are generated and cannot avoid paying their fair share of tax through aggressive tax planning," the statement said.

Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: "Our current approach to corporate taxation no longer fits today's reality. We are using outdated tools and unilateral measures to respond to the challenges of a digitalised, globalised economy. For fairer taxation and less fragmentation in the single market, we need to fundamentally review our corporate tax framework in the EU. Big, small and medium sized companies should be able to benefit from the internal market on an equal footing."

The Commission presented a package of measures to boost tax transparency in the EU in March. The new plan will take a more comprehensive approach to improving corporate taxation it said, and will include a strategy to re-launch work on CCCTB.

CCCTB was first proposed in 2001, and last raised in 2011, according to the Commission website.

The latest proposal, however, has some important differences, tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com said.

"This time it would be compulsory for companies in the relevant countries – formerly it would have been voluntary. This means it will affect UK multinationals, as they will have to operate it for their subsidiaries in the consolidated corporate tax zone. Also, it will be a two stage measure: first a common tax base, and then consolidation. Consolidation means that cross-border losses get allowed, which makes it more expensive for the countries operating it," she said.

The proposal is part of a general move to reduce tax avoidance, with EU investigations into state aid for multinational companies, and the Organisation for Economic Co-operation and Development (OECD)'s base erosion and profit shifting (BEPS) work on international tax avoidance,.

"It is consistent with the OECD’s BEPS project, and the moves being made in relation to state aid investigations into tax, that the EU should try to reinvigorate the CCCTB project," Self said.

"However, significant effort will be needed to bring the project to fruition, and it is unlikely to happen quickly," she said.

"The proposals for compulsory adoption in those countries which implement the consolidated base means that these proposals will be watched closely by UK businesses, since they will have to be ready to apply them to relevant subsidiaries if the proposals become law," Self said.

Earlier this month competition commissioner Margrethe Vestager said that the EU will not be able to move quickly enough to tackle anti-competitive tax practices by the different member states without "at least" a single corporate tax base and automatic exchange of information about tax rulings.