Tuesday

26th Oct 2021

Brussels pushes common EU tax base

The European Commission on Wednesday (16 March) proposed a system where companies will be able to file just one tax return for the whole of the EU, a move that Brussels stresses would not infringe on states' ability to set their own corporate tax rates.

The move is being sold as a winner for business, but Ireland believes it is one step down the road to removing its low corporate tax rate. A number of other member states also oppose the move and so it is far from certain that the proposal will fly.

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  • The CCCTB would save businesses billions a year, says the commission (Photo: Flickr)

The proposal would see the development of a common system for calculating the tax base for firms operating across the EU, offering them a ‘one-stop shop' for filing returns and simplifying what counts as profits and losses rather than having to deal with up to 27 different tax regimes.

The system, termed a common consolidated corporate tax base, or CCCTB, would save companies €700 million a year in reducing the costs of complying with tax regimes and as much as €1.3 billion by being able to consolidate profits and losses.

Small and medium-sized businesses looking to expand across borders meanwhile, the commission estimates, would win an extra €1 billion in savings.

Firms "are faced with an extremely complex system for determining how intra-group transactions should be taxed (transfer pricing), and cannot offset their losses in one member state against profits in another," the commission said in a statement.

"The result is that larger businesses are faced with huge costs and complexities, while smaller businesses are often completely deterred from expanding within the EU."

Under the CCCTB, companies would file a single, consolidated tax return with one administration for their entire activity within the EU. On the basis of this, the operation's tax base would then be shared out amongst the member states in which it is active, based on a specific formula.

Taxation commissioner Algirdas Semeta said it will "make it easier, cheaper and more convenient to do business in the EU ... Today's proposal is good for business and good for the EU's global competitiveness."

However, Dublin remains steadfastly opposed to the plan, with new premier Enda Kenny last week describing the move as "tax harmonisation through the back door."

But Ireland is not alone in its stance. The Czechs, Slovaks and British also do not a agree with the move.

In February, an Ernst & Young study, commissioned by the Irish government, found that as there are costs involved in any shift to a new tax regime, before any savings could be realised, there would be high initial compliance costs in changing company models.

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