The European Commission has today proposed a common system for calculating the tax base of businesses operating in the EU. The aim of this proposal is to significantly reduce the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face in having to comply with up to 27 different national systems for determining their taxable profits.
The proposed Common Consolidated Corporate Tax Base (CCCTB), would mean that companies would benefit from a „one-stop-shop” system for filing their tax returns and would be able to consolidate all the profits and losses they incur across the EU. Member States would maintain their full sovereign right to set their own corporate tax rate. The Commission estimates that, every year, the CCCTB will save businesses across the EU €700 million in reduced compliance costs, and €1.3 billion through consolidation. In addition, businesses looking to expand cross-border will benefit from up to €1 billion in savings. The CCCTB will also make the EU a much more attractive market for foreign investors.
Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-Fraud and Audit said: „The CCCTB will make it easier, cheaper and more convenient to do business in the EU. It will also open doors for SMEs looking to grow beyond their domestic market. Today’s proposal is good for business and good for the EU’s global competitiveness.”
When it comes to corporate taxation, there are still serious obstacles to the Single Market which are holding businesses back. Cross-border companies have to deal with up to 27 different rulebooks for calculating their tax base and must work with up to 27 different tax administrations. In addition, they 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 result is that larger businesses are faced with huge costs and complexities, while smaller businesses are often completely deterred from expanding within the EU.
The CCCTB aims to overcome these problems by offering companies one single set of corporate tax base rules to follow and the possibility of filing a single, consolidated tax return with one administration for their entire activity within the EU. On the basis of this single tax return, the company’s tax base would then be shared out amongst the Member States in which it is active, according to a specific formula. This formula will take into account three factors: assets, labour and sales. After the tax base has been apportioned, Member States will be allowed to tax their share of it at their own corporate tax rate. Under the CCCTB, Member States will continue to set their corporate tax rate at the level they see fit, as is their national prerogative.
The CCCTB would be optional for companies. This means that those that felt that they would benefit from a harmonised EU system could opt-in, while other companies could continue to work within their national systems.
The CCCTB has been identified as an important initiative of the Barroso II Commission in the context of the Europe 2020 Strategy. It has also been mentioned in a series of major policy documents that aim to remove obstacles to the Single Market and stimulate growth and job creation within the EU (Single Market Act, Annual Growth Survey and the „Pact for the Euro„).