Thursday

22nd Jun 2017

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).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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?

Row between EU ministers halts e-book tax rate

A bill to reduce VAT rates on e-books and e-publications has become the latest victim of a row between the Czech Republic and its partners over its own plan to collect VAT.

Focus

EU and China move to fill US void

At a summit in Brussels, EU and Chinese leaders will attempt to deepen ties on trade and climate as US president Trump plans to pull out of the Paris climate deal.

Italy reaches EU deal on failing bank

After months of negotiations, the European Commission and Italy agreed on the terms of rescue for Monte dei Paschi di Siena bank, including job cuts, salary caps and private sector involvement in the bailout.

News in Brief

  1. Tusk can 'imagine' the UK still remaining in EU
  2. Norway offers more blocks for Arctic oil exploration
  3. EU court lowers evidence standards in vaccine ruling
  4. Merkel and Macron to speak at Kohl's EU ceremony
  5. EU commission presents plan to enhance tax transparency
  6. Romanian PM ousted in party revolt
  7. MEPs elect new internal market committee chairwoman
  8. Starbucks to hire 2,500 refugees

Stakeholders' Highlights

  1. EPSUAfter 9 Years of Austerity Europe's Public Sector Workers Deserve a Pay Rise!
  2. Dialogue PlatformGlobalised Religions and the Dialogue Imperative. Join the Debate!
  3. UNICEFEU Trust Fund Contribution to UNICEF's Syria Crisis Response Reaches Nearly €200 Million
  4. EUSEW17Bringing Buildings Into the Circular Economy. Discuss at EU Sustainable Energy Week
  5. European Healthy Lifestyle AllianceCan an Ideal Body Weight Lead to Premature Death?
  6. Malta EU 2017End of Roaming Charges: What Does It Entail?
  7. World VisionWorld Refugee Day, a Dark Reminder of the Reality of Children on the Move
  8. European Social Services ConferenceDriving innovation in the social sector – 26-28 June
  9. Dialogue PlatformMuslims Have Unique Responsibility to Fight Terror: Opinon From Fethullah Gülen
  10. EUSEW17Check out This Useful Infographic on How to Stay Sustainable and Energy Efficient.
  11. Martens CentreJoin Us on 21 June for a Debate With VP Katainen on the Future of European Defence
  12. Counter BalanceEuropean Parliament Criticises the Juncker Plan's Implementation

Latest News

  1. EU set to roll over Russia sanctions amid defence talks
  2. May to soothe EU leaders' post-election Brexit worries
  3. Leaders at EU summit to reinforce Libyan coast guard
  4. Macron reshuffles French government to ward off scandals
  5. Macron's summit debut could kickstart Franco-German motor
  6. Small EU states meet amid search to fill post-Brexit void
  7. Turkey received €1bn in EU money to develop democracy
  8. Bulgarian commissioner fields easy questions at MEP hearing