Brussels, 22/05/2015 (Agence Europe) - On 17 June, the European Commission will present its action plan to make corporate taxation in Europe fairer and more transparent. It announces that it will come back with a revised proposal on the common consolidated corporate tax base (CCCTB) within 18 months, following an impact assessment, although this issue will be one of those put to the College of Commissioners on Wednesday 27 May for an orientation debate.
As revised, the CCCTB would be obligatory for companies, rather than just optional, and the 'consolidation' aspect will be postponed. Michel Sapin, the French finance minister, acknowledged that the great issue with the CCCTB was the 'consolidation' aspect. “First of all you buy your land, then you build your house”, he said in an interview with EUROPE (see EUROPE 11301).
The aim, therefore, will be to adopt a stage-by-stage approach for its implementation and to agree in the short term on elements to address base erosion and profit shifting ('BEPS').
In the meantime, in other words until there is a fully consolidated CCCTB, the aim will be to allow companies operating at a cross-border level to offset losses they produce in the EU against their tax payments. In order to make sure that states do not end up carrying the losses made by a company in another state, however, a 'catch' mechanism will be provided for, once the company is in a better state of economic health.
The European Commission is also expected to announce the launch of the public consultation to assess the impact of options for the publication of tax information by companies (country-by-country reporting). Unless the results of this impact study are disastrous, the Commission is expected to make a proposal to amend the accounting directive to this effect, either at the end of this year or at the beginning of next. Although this issue is to be decided upon by the Council by qualified majority, France and Germany have already taken position in favour of reporting to the tax administrations.
On the question of transparency, the Commission also hopes to secure a more joint approach with the jurisdictions of so-called 'uncooperative' third countries. It will also propose a reform of the 'Code of Conduct' group. On this point, some of the member states, such as Germany, Italy, France and Spain, wish to revise the mandate of this group, to make it more political. At the informal Riga Ecofin, only Sweden is reported to have taken the floor to stress that it was unconvinced of the need to revise the mandate (see EUROPE 11302). Among the ministers, the issue of the unanimity rule for this group will also be the subject of debate.
As the Commission has stressed on many occasions, it wants profit to be taxed where it is generated. This will be one of the cornerstones of its action plan. To this effect, it is considering how to make progress on effective taxation issues and base erosion within the EU and outside it. As regards effective taxation, it is responding to requests from France, which states that it awaits 'innovative' proposals for June. At this stage, therefore, the Commission may decide to go no further than to state that it needs to reflect further on this issue, while noting that the work can start within the 'Code of Conduct' group. It also hopes to improve the EU framework on transfer prices and anchor preferential regimes where the value is generated.
On 27 May, the Commissioners will be asked for their opinion on how to ensure effective taxation of profits, taking account of the need for a competitive fiscal environment favourable to growth.
The arduous journey towards the automatic exchange of information on tax rulings. The Commission's proposal to make the exchange of information on tax rulings automatic is making its way painstakingly through the Council, where it has not yet gone beyond technical discussions. The Commission wanted to impose 10-year retroactivity on this exchange for rulings which are still producing an effect today. At the moment, progress is being made towards retroactivity of five years, but also including rulings which are no longer valid, under the compromise of the Presidency, of which EUROPE has had sight.
This compromise clarifies the scope of application of the definition of tax rulings and advance agreements on transfer prices. However, a number of states are rallying behind the Commission's initial proposal, arguing that the compromise could bring in a potential loophole and give the states discretionary powers of interpretation.
Additionally, the Presidency's compromise gives the states three months, rather than one month, to exchange information with each other at the end of each calendar quarter. The discussions also cover the states which should receive the information (all of them, or just those concerned by the ruling?). The role of the Commission, which has put itself in the centre, is also the subject of debate, as some states are opposed to the idea that it should also receive the information.
It would appear that technical discussions are no longer sufficient for this highly political dossier. A meeting of the Treasury Directors is scheduled for early next month, ahead of further technical discussions at the working group on 9 June. (Elodie Lamer)