The EU Parliament’s ECON committee has called for the CCCTB to be implemented by the end of 2020, in a substantially tougher form than the Commission’s original proposal. The committee has tabled amendments in separate reports on directives for the common corporate tax base (CCTB) and the common consolidated corporate tax base (CCCTB), but recommends implementing both at the same time, stating that ‘one part cannot exist without the other’.
The Commission put forward a proposal in 2016 for a two-step approach, involving establishment of rules for calculating the common corporate tax base (CCTB), followed by the common consolidated corporate tax base (CCCTB), allowing businesses to offset losses in one member state against profits in another.
The ECON committee proposes lowering the turnover threshold for inclusion in the CCCTB to €40m, with the aim of capturing ‘most of the companies with cross border activities’. The report calls the €750m threshold proposed by the Commission, ‘not fit for the purposes of the CCCTB’.
The report proposes introducing a minimum corporate tax rate of 25%, aimed at narrowing the gap between the amount of taxes paid by multinationals and SMEs, which has arisen through multinationals having the resources to shift their business to low-tax jurisdictions.
The amended proposal would include a less generous research and development tax credit of 10% for staff costs up to €20m.
The committee has also introduced amendments setting out a definition of ‘digital business establishment’. This would include:
an establishment specifically directed towards consumers or businesses in a member state, with due regard to the physical locations of the consumers or users and of the suppliers of the goods and services provided;
if those physical locations cannot be ascertained, an establishment conducting its business under the top-level domain of the member state or of the EU; and
mobile-application-based businesses, distributing their applications via the member state-specific part of a mobile application distribution centre, or under a domain which makes it clear that the establishment is directed towards consumers or businesses in a member state.
‘The CCCTB is a missing brick in the construction of the genuine internal market and in fighting tax avoidance. The CCCTB brings about tax certainty, clear and stable regulatory framework and strong anti-tax avoidance rules including abolition of transfer pricing’, states the report, noting also that transfer pricing accounts for approximately 70% of all profit shifting in the EU.
The ECON committee amendments introduce a fourth element to the formula for sharing taxable profits between member states: personal data collection and exploitation for commercial purposes. The original proposal uses three equally-weighted factors: sales, assets and labour.
The dissenting opinions of a minority of committee members are recorded in the report. These argue that:
the proposal for a CCCTB will only have a minor impact on tackling tax avoidance and tax evasion, while the consequences on member states’ economies will be very severe;
no sufficiently detailed country-by-country impact assessment has been conducted for either the CCTB or CCCTB, particularly in terms of the impact on member states’ tax revenue;
aggressive tax planning by multinational companies is a global problem, best tackled on an internationally agreed basis through the OECD BEPS initiative; and
reasoned opinions of seven national parliaments objecting to the CCTB and CCCTB proposals on grounds of subsidiarity and tax sovereignty have not been taken into account in the report.
See Report on the proposal for a Council directive on a common corporate tax base (bit.ly/2IaURAi) and Report on the proposal for a Council directive on a common consolidated corporate tax base (bit.ly/2oPysR5).
The EU Parliament’s ECON committee has called for the CCCTB to be implemented by the end of 2020, in a substantially tougher form than the Commission’s original proposal. The committee has tabled amendments in separate reports on directives for the common corporate tax base (CCTB) and the common consolidated corporate tax base (CCCTB), but recommends implementing both at the same time, stating that ‘one part cannot exist without the other’.
The Commission put forward a proposal in 2016 for a two-step approach, involving establishment of rules for calculating the common corporate tax base (CCTB), followed by the common consolidated corporate tax base (CCCTB), allowing businesses to offset losses in one member state against profits in another.
The ECON committee proposes lowering the turnover threshold for inclusion in the CCCTB to €40m, with the aim of capturing ‘most of the companies with cross border activities’. The report calls the €750m threshold proposed by the Commission, ‘not fit for the purposes of the CCCTB’.
The report proposes introducing a minimum corporate tax rate of 25%, aimed at narrowing the gap between the amount of taxes paid by multinationals and SMEs, which has arisen through multinationals having the resources to shift their business to low-tax jurisdictions.
The amended proposal would include a less generous research and development tax credit of 10% for staff costs up to €20m.
The committee has also introduced amendments setting out a definition of ‘digital business establishment’. This would include:
an establishment specifically directed towards consumers or businesses in a member state, with due regard to the physical locations of the consumers or users and of the suppliers of the goods and services provided;
if those physical locations cannot be ascertained, an establishment conducting its business under the top-level domain of the member state or of the EU; and
mobile-application-based businesses, distributing their applications via the member state-specific part of a mobile application distribution centre, or under a domain which makes it clear that the establishment is directed towards consumers or businesses in a member state.
‘The CCCTB is a missing brick in the construction of the genuine internal market and in fighting tax avoidance. The CCCTB brings about tax certainty, clear and stable regulatory framework and strong anti-tax avoidance rules including abolition of transfer pricing’, states the report, noting also that transfer pricing accounts for approximately 70% of all profit shifting in the EU.
The ECON committee amendments introduce a fourth element to the formula for sharing taxable profits between member states: personal data collection and exploitation for commercial purposes. The original proposal uses three equally-weighted factors: sales, assets and labour.
The dissenting opinions of a minority of committee members are recorded in the report. These argue that:
the proposal for a CCCTB will only have a minor impact on tackling tax avoidance and tax evasion, while the consequences on member states’ economies will be very severe;
no sufficiently detailed country-by-country impact assessment has been conducted for either the CCTB or CCCTB, particularly in terms of the impact on member states’ tax revenue;
aggressive tax planning by multinational companies is a global problem, best tackled on an internationally agreed basis through the OECD BEPS initiative; and
reasoned opinions of seven national parliaments objecting to the CCTB and CCCTB proposals on grounds of subsidiarity and tax sovereignty have not been taken into account in the report.
See Report on the proposal for a Council directive on a common corporate tax base (bit.ly/2IaURAi) and Report on the proposal for a Council directive on a common consolidated corporate tax base (bit.ly/2oPysR5).
90a1d87b-c1b5-43c3-a720-cd324830adee.tmb-editorspic.jpg?sfvrsn=1b2d0a7e_1)
