Brussels, 16/03/2011 (Agence Europe) - On Wednesday 16 March, when presenting his proposal for the creation of a Common Consolidated Corporate Tax Base (CCCTB), Taxation Commissioner Algirdas Šemeta once again highlighted the advantages that such an initiative would have for the Union, businesses and citizens. He placed emphasis on the fact that this is not a first step towards harmonising rates within the EU, and also highlighted that it was optional for businesses. Nonetheless, he did not conceal the fact that, initially, it could entail a tax revenue shortfall for some member states and should bring in recasting of the current framework.
According to the commissioner, the initiative (for details of the project, see EUROPE 10311) aims as far as possible to abolish tax barriers, administrative charges and legal uncertainty in the single market. It should allow the Union to improve its competitiveness at international level during this period of crisis by adopting, like its competitors, a uniform common consolidated tax base. Another advantage for the EU and its member states would be that, because of the uniform nature of the rules, CCCTB should bring in greater transparency when it comes to calculating taxable profits, by highlighting the effective rates of taxation in the member states, thus avoiding inequitable tax competition.
The proposal would, above all, be advantageous for companies or groups of companies operating in several member states by offering them the possibility to base themselves on a single set of rules valid throughout the EU for the calculation of taxable profit, and no longer on 27 different systems, which would make for greater legal and administrative certainty. These companies or corporate groups could also: - use a one-stop shop system (or a mixed system for groups made up of a reference tax authority and a main taxpayer) for filling in their tax statements; - and consolidate their profits and loss at Union level and no longer at the level of each member state, by compensating the losses of one subsidiary in one country by using the profits of another in another country. A breakdown mechanism would allow the tax proceeds to be redistributed in all member states in which the company operates according to a specific formula that would take three factors into consideration (fixed assets, labour and turnover). Once the taxable base is shared out, the member states will be free to tax their share of this base at the rates they apply for corporate tax.
The system should, above all, allow businesses to considerably reduce their administrative costs and their transfer prices (for groups). Thus, compliance costs would be reduced by 7% at EU level (€700 million) and, thanks to consolidation, companies could save €1.3 billion. Furthermore, for businesses hoping to develop outside national borders, savings would be around €1 billion.
Some say, however, that CCCTB would not have only advantages and gains for companies, as this could bring about loss of tax revenue in some member states, which would seek to offset the loss by increasing taxes or with the imposition of additional taxes.
The commissioner did not rule out this possibility but, in his view, taken as a whole at EU level, the advantage would be real over the long term for all member states. He said in this respect that the CCCTB is necessarily part of a dynamic process and that it should bring about a readjustment of the current regulation framework in time. The Commission, he said, has endeavoured to establish the simplest and most flexible system possible by introducing a tax base that is as broad as possible (it is 7.9% broader compared to the current average base of member states) and by leaving the system optional for businesses and member states. Consequently, it is still very difficult to foresee in what specific terms the readjustment could be achieved, all the more as states remain sovereign when it comes to fixing the tax rate.
Given the opposition expressed by some states, the commissioner said that enhanced cooperation cannot be ruled out and that, furthermore, companies at European level have welcomed the proposal. (F.G./transl.jl)