The European Commission has formally launched its action plan for reform of corporate taxation in the EU, which includes plans to resume work on the common consolidated corporate tax base (CCCTB) to strengthen the single market for businesses and reduce corporate tax avoidance (for the details, see www.bit.ly/1JSRagi).
The re-launch of the CCCTB, originally proposed in 2011, is the first step towards a common corporate tax base, with a new proposal to introduce mandatory CCCTB through a step-by-step approach allowing member states to progress on agreeing a common taxable base and to agreeing international elements on BEPS. These include updated rules on permanent establishment, so that companies must have a taxable presence in a member state where they have economic activities and improved controlled foreign corporation rules, which ensure that profits left in low or no tax companies are effectively taxed. These aspects of the proposal can significantly help to protect the single market from base erosion and profit shifting towards non-EU countries. As a next step the Commission will present proposals for consolidation early in 2016.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: ‘The Commission has laid the foundation for a new approach to corporate taxation in the EU. Member states must now build on it.’
However, Emma Marcegaglia, president of BusinessEurope, Europe’s biggest business lobby group, warned that ‘efforts to fight fraud and evasion must not undermine the principle of fair tax competition whereby EU member states are able to set their own tax policies and rates within the international rules that they have agreed on.
‘We have always been clear that to maintain the support of the business community, the CCCTB must both be optional for companies and encourage them to expand into new markets within the EU by allowing consolidation of profit and losses in different EU member states. We are concerned that the expected new CCCTB proposal will be mandatory for companies and will not allow for full consolidation. US companies are able to consolidate profit and losses between states; the CCCTB must offer this possibility for EU companies.’
Writing in this week’s Tax Journal, Chris Morgan notes that the report makes it clear that there are no plans for the harmonisation of corporate tax rates. Without member state support, these proposals will not progress. As UK financial secretary, David Gauke, has described the proposal as one ‘still looking for a justification’, ‘it is difficult to see how the Commission will be able to push this through’, Morgan observes.
Country by country reporting: In related news, the Commission has invited responses to a public consultation on requiring MNCs to disclose tax information on a country by country basis. This forms part of the Commission's new action plan for achieving greater corporate tax transparency. The consultation document proposes that companies could be required to disclose taxes in every country they do business, and a number of further suggestions including possible safeguards, and invite further suggestions and views on proposals. Responses close on 9 September 2015. For the consultation, see www.bit.ly/1GeJ1eY.
Platform for good governance: The Commission has also published its decision to establish the commission expert group ‘Platform for tax good governance, aggressive tax planning and double taxation’, in order to assist the Commission in matters as its name suggests. The Platform is made up of representatives from business, tax professionals and civil society organisations. Its next meeting will take place on 10 July 2015.
The European Commission has formally launched its action plan for reform of corporate taxation in the EU, which includes plans to resume work on the common consolidated corporate tax base (CCCTB) to strengthen the single market for businesses and reduce corporate tax avoidance (for the details, see www.bit.ly/1JSRagi).
The re-launch of the CCCTB, originally proposed in 2011, is the first step towards a common corporate tax base, with a new proposal to introduce mandatory CCCTB through a step-by-step approach allowing member states to progress on agreeing a common taxable base and to agreeing international elements on BEPS. These include updated rules on permanent establishment, so that companies must have a taxable presence in a member state where they have economic activities and improved controlled foreign corporation rules, which ensure that profits left in low or no tax companies are effectively taxed. These aspects of the proposal can significantly help to protect the single market from base erosion and profit shifting towards non-EU countries. As a next step the Commission will present proposals for consolidation early in 2016.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: ‘The Commission has laid the foundation for a new approach to corporate taxation in the EU. Member states must now build on it.’
However, Emma Marcegaglia, president of BusinessEurope, Europe’s biggest business lobby group, warned that ‘efforts to fight fraud and evasion must not undermine the principle of fair tax competition whereby EU member states are able to set their own tax policies and rates within the international rules that they have agreed on.
‘We have always been clear that to maintain the support of the business community, the CCCTB must both be optional for companies and encourage them to expand into new markets within the EU by allowing consolidation of profit and losses in different EU member states. We are concerned that the expected new CCCTB proposal will be mandatory for companies and will not allow for full consolidation. US companies are able to consolidate profit and losses between states; the CCCTB must offer this possibility for EU companies.’
Writing in this week’s Tax Journal, Chris Morgan notes that the report makes it clear that there are no plans for the harmonisation of corporate tax rates. Without member state support, these proposals will not progress. As UK financial secretary, David Gauke, has described the proposal as one ‘still looking for a justification’, ‘it is difficult to see how the Commission will be able to push this through’, Morgan observes.
Country by country reporting: In related news, the Commission has invited responses to a public consultation on requiring MNCs to disclose tax information on a country by country basis. This forms part of the Commission's new action plan for achieving greater corporate tax transparency. The consultation document proposes that companies could be required to disclose taxes in every country they do business, and a number of further suggestions including possible safeguards, and invite further suggestions and views on proposals. Responses close on 9 September 2015. For the consultation, see www.bit.ly/1GeJ1eY.
Platform for good governance: The Commission has also published its decision to establish the commission expert group ‘Platform for tax good governance, aggressive tax planning and double taxation’, in order to assist the Commission in matters as its name suggests. The Platform is made up of representatives from business, tax professionals and civil society organisations. Its next meeting will take place on 10 July 2015.
