Sunday

18th Feb 2018

Commission revives corporate taxation plan

  • EU tax commissioner Pierre Moscovici said the new corporate reform was more attractive to business than the one from 2011. (Photo: European Commission)

The European Commission has unveiled a new proposal for corporate taxation, designed to help crack down on tax avoidance in the EU.

The scheme is known as the common consolidated corporate tax base (CCCTB).

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

”It sounds barbaric, but the principle is actually very simple,” EU tax commissioner Pierre Moscovici told journalists on Wednesday (26 October).

”We want a single set of rules for calculating taxable profits anywhere in the EU bloc.”

This means companies will only need to fill out one tax declaration in a single EU tax jurisdiction, no matter how many EU countries they operate in.

Beside cutting red tape, the proposal would also close some legal loopholes and stop firms from shifting profits to low-tax regimes, as taxes would be shared among the jurisdictions where the companies operate and generate profits.

Brussels already tried to introduce a CCCTB in 2011. But the effort was resisted by EU capitals, which feared it would curtail their sovereignty to raise (or lower) taxes.

The 2011 initiative was officially scrapped on Tuesday, just before the EU executive presented a rebooted version.

“A lot has changed since 2011,” Moscovici said.

Most importantly, recent scandals - the LuxLeaks revelations and the commission’s probe on Apple in Ireland - have showed how some EU governments wooed multinationals with sweetheart deals, reducing their tax bills to 1-2 percent.

According to the commission’s own impact assessment, Luxembourg could lose 1 percent of GDP if the proposal went through.

To make the pill less bitter, the bill is divided in two: member states will first set common rules on the calculation of taxable profits, and decide later where those profits should be taxed.

”This two-step approach will allow for better negotiations,” the French commissioner said.

He hoped EU states would conclude negotiations on the first step by 1 January 2019 and a year later on the second.

”Member states are committed to this fight,” Moscovici said and pointed out they had recently adopted an anti-tax avoidance directive in just five months.

The commission is also offering rewards for companies using the scheme, giving huge tax breaks on research and development spending. In some cases, firms will be able to write off double the amount they spent on research.

Game changer?

Some fear, however, that the commission has gone too far in trying to accommodate EU capitals and business.

Tove Ryding from the European Network on Debt and Development (Eurodad) said the proposal would be stuck in the initial stage - member state talks on the definition of a common taxable base - for an indefinite time.

”Only the full implementation of the commission’s proposal would stop multinationals from dodging their taxes,” she told this website.

French Socialist MEP Pervenche Beres said that the commission’s incentives could create new loopholes.

”We are big supporters of innovation but it is crucial to have a good definition of R&D to ensure that this exemption is not used to artificially shift profits and reduce the tax base,” Beres said in a statement.

German far-left MEP Fabio De Masi said the rules to determine which enterprises belong to the same company were not defined well enough.

“On top of that, tax havens outside of the EU are excluded from the commission's proposal," De Masi said.

“The proposal threatens to decrease the tax base even further and to intensify tax competition.”

The socialist leader in the European Parliament Gianni Pittella said tax avoidance would only stop when corporate tax rates within the EU were harmonised - something neither the commission nor EU capitals are currently considering.

The Green group in the European parliament called the proposal “revolutionary”.

“Sounds like a boring acronym, but it is a game changer,” the group wrote in a blog post.

Others called on EU capitals to adopt the rules as soon as possible.

“States who oppose these rules want to take the bread out of the mouths of others,” said German centre-right MEP Burkhard Balz.

Ireland, which was one of the staunchest opponents of the first CCCTB proposal, vowed to engage fully in discussions while assessing whether the proposal was in its interests.

The proposal will now be sent to national governments, who have to agree unanimously for the plan to become law.

EU tax haven list could name US

The EU commission plans to name and shame foreign tax havens in a new list, but will EU capitals keep their friends, such as the US, out of the register?

Baltic states demand bigger EU budget

The leaders of Estonia, Latvia, and Lithuania say in a joint letter that they are open to talks on creating "new own resources" for a bigger EU budget after the UK leaves the EU.

News in Brief

  1. Merkel: Nord Stream 2 pipeline poses 'no danger'
  2. Spanish king in Barcelona next week
  3. Turkey jails journalists for life
  4. Make budget cuts in farm and regional funds, the Dutch say
  5. UN: Hungary's anti-migration bill is 'assault on human rights'
  6. Journalist Deniz Yucel freed in Turkey
  7. New organic farming bill not ready until late spring
  8. Commissioner: Western Balkans in EU is 'obvious'

Stakeholders' Highlights

  1. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  2. EPSUMovie Premiere: 'Up to The Last Drop' - 22 February, Brussels
  3. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  4. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  5. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  6. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  7. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name
  8. Dialogue PlatformBeyond the Errors in the War on Terror: How to Fight Global Militarism - 22 February
  9. Swedish EnterprisesHarnessing Globalization- at What Cost? Keynote Speaker Commissioner Malmström
  10. European Friends of ArmeniaSave The Date 28/02: “Nagorno-Karabakh & the EU: 1988-2018”
  11. European Heart NetworkSmart CAP is Triple Win for Economy, Environment and Health
  12. European Free AlllianceEFA Joined the Protest in Aiacciu to Solicit a Dialogue After the Elections

Latest News

  1. EU asks charities to explain anti-abuse measures
  2. ECB, Budget, EU elections This WEEK
  3. EU states stay mute on implementation of mercury bill
  4. Baltic states demand bigger EU budget
  5. Germany raises concerns over Hungary's 'Stop Soros' bills
  6. EU ties Brexit transition talks to divorce agreement
  7. EU divided over Western Balkan enlargement
  8. Facebook and Twitter weak on protecting users, says EU

Stakeholders' Highlights

  1. EPSUDrinking Water Directive Step Forward but Human Right to Water Not Recognized
  2. European Gaming & Betting AssociationGambling Operators File Data Protection Complaint Against Payment Block in Norway
  3. European Jewish CongressEJC Expresses Deep Concern Over Proposed Holocaust Law in Poland
  4. CECEConstruction Industry Gets Together to Discuss the Digital Revolution @ the EU Industry Days
  5. Mission of China to the EUChina-EU Relations in the New Era
  6. European Free AlllianceEnd Discrimination of European Minorities - Sign the Minority Safepack Initiative
  7. Centre Maurits Coppieters“Diversity Shouldn’t Be Only a Slogan” Lorant Vincze (Fuen) Warns European Commission
  8. Dialogue PlatformWhat Can Christians Learn from a Global Islamic Movement?
  9. European Jewish CongressEJC President Warns Europe as Holocaust Memory Fades
  10. European Free AlllianceNo Justice From the Spanish Supreme Court Ruling
  11. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  12. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%