On Thursday 15 March, the European Parliament adopted unchanged the draft Tang report on a common corporate tax base (CCTB) and the draft Lamassoure report on the consolidation of this tax (CCCTB), the introduction of which will help the functioning of the single market enormously, but which has for years faced the uncompromising opposition of states that have developed economic models based on tax competition (see EUROPE 11967).
“For businesses, [the CCCTB project] offers a single fiscal space for the main tax. This means simplicity, justice, fair competition conditions. For the member states, it is the only way of putting an end once and for all to the temptation of reinventing national laws or practices, which is tantamount to stealing from the neighbours in taxation matters”, Lamassoure (EPP, France), said the day before, during a plenary session debate.
Lieve Wierinck (ALDE, Belgium) justified the purpose of this approach: “having one internal market with 27 different tax systems is a recipe for tax avoidance”.
The two reports approve the method of calculating the corporate tax base (earnings minus exempted revenue and deductible charges) suggested by the Commission in autumn 2016 (see EUROPE 11647). However, they have changed the exemptions (e.g. tax credit of 10% of the costs for research and development up to €20 million).
From January 2019 onwards, all companies legally constituted in a member state, including its permanent and digital establishments, should be subject to this tax, in the view of the MEPs. The first companies to be covered by the scope of application of the text would be the ones that are part of a group with a consolidated turnover in excess of €750 million. This threshold will be gradually reduced to zero over a period of seven years.
The proposal also aims to allow for companies’ profits to be taxed where they are generated, in the digital era. Introducing the concept of digital presence in a member state at EU level would help to require companies to pay tax, even if they do not have a fixed establishment in that country.
“Digital platforms such as Google and Facebook have tens of millions of users in my country, but pay no tax there”, Lamassoure observed.
Distribution formula. The tax will be collected in just one member state, under the principle of the single window.
The tax collected would be distributed between the countries in which a company is active under a specific distribution key. The Commission proposed three distribution factors with the same weighting: labour, fixed assets, sales by destination. The Parliament adds a fourth factor: the collection and use of the personal data of users of online platforms and services.
Personal data are valuable assets used by companies such as Facebook, Amazon and Google to create wealth, but are not currently taken into account to calculate the tax burdens, the European Parliament explains in a press release.
Clashing with the French government, the French courts have found that as tax law currently stands, Google and its 700 employees in France have no taxable presence in the country and may therefore pay tax in Ireland for its French activities.
The MEPs consider that the CCCTB is the long-term solution to the taxation of the internet giants. However, the Commission will present a specific legislative initiative on Wednesday 21 March (see other article).
“This is a different approach, aiming to be simpler and faster. A tax on sales or on certain commercial revenue”, Lamassoure said, warning: “make no mistake about it, an animal of this kind will have the gestation period of a pachyderm and will give birth to a mouse at most. It will bring in a few billion euros. Furthermore, as for any indirect tax, the real burden will be carried not by the taxpayer company, but by its customers”.
It is worth noting that an amendment by the Greens/EFA Group calling for the introduction of a minimum taxation rate was rejected. “I am very sorry that the Liberals and Conservatives did not want a minimum European rate for corporate tax”, said French MEP Eva Joly. (Original version in French by Mathieu Bion)