Brussels, 02/05/2007 (Agence Europe) - “The European Commission is convinced that the Common Consolidated Corporate Tax Base will make a major contribution to the success of the internal market,” Taxation Commissioner László Kovács said on Wednesday 2 May. He was presenting the Commission communication giving an inventory of the work carried out on this matter in 2006 and setting out the next steps towards the future draft directive on harmonising the common consolidated corporate tax base (CCCTB). He kept the timescale for the start of the legislative phase: “first half of 2008” for the draft directive and its application from 2010. Compared with the inventory given one year ago (see EUROPE 9168), two fundamental questions were raised in 2006 relating to the involvement of the financial sector and the administrative framework of the CCCTB. To convince member states and hesitant Commissioners, or indeed ones who opposed the project, Mr Kovács repeated over and over that the Commission has no intention of intervening on tax levels, which member states are responsible for setting. “Harmonisation will affect the tax base, and not levels!”, he explained. The German Presidency will be holding a conference specifically on CCCTB in Berlin on 15 and 16 Berlin and has included this dossier on the agenda of the June Ecofin Council.
Inventory. In 2006, the work of the expert group within the Council continued. Two new sub-groups were set up to focus on the taxation of groups and the repartition mechanism, in addition to four sub-groups already active in the following areas: assets and depreciation, provisions and reserves, taxable income and international aspects.
Two questions will have a “considerable influence” on the form of the legislative proposal, the Commission says, namely the degree and the arrangements for integrating the financial sector in CCCTB as well as the improvement of administrative cooperation between member states. On the first point, the Commission states that the idea of including the financial sector in CCCTB was “quite well received”, a separate or complete exclusion system not arousing “much enthusiasm at present”. Even the “specific rules” to take account of the specific nature of the financial sector are the subject of different views.
Still at an initial stage, discussions on the administrative management of CCCTB will continue. “Some in the business sector urged in favour of a sort of one stop shop”, which would allow companies to deal directly with a “single tax administration”, the Commission document states. During the meeting of the College of Commissioners on Wednesday, Commissioners withdrew a number of passages from the paragraph on the administrative framework of CCCTB as they evoked the possibility of establishing legal appeal action at European level. José Manuel Barroso does not wish to upset those against CCCTB when, for the Commission, it was simply a matter of carrying out an inventory.
The Commission is also sketching out a system for an impact analysis that will accompany the future legislative proposal. According to the communication, it will describe the tax obstacles that deter companies from fully benefiting from the internal market as well as failings in the current system that allow companies to circumvent taxation. Above all, the difference between small and medium companies and multinationals when it comes to conformity costs will be addressed. The impact analysis will also present alternative solutions including at least three hypotheses: status quo, a common base without consolidation and a common consolidated base. For each of the options envisaged, it will analyse the macro- and micro-economic consequences and the impact of tax receipts.
Next stages. Mr Kovacs reaffirmed the Commission's attachment to several principles: the future CCCTB should imply the consolidation of national tax bases in order to fully benefit from the advantages of the harmonisation process; recourse to CCCTB should be optional for member states and for companies; and the corporate tax base should be “broad, simple and uniform”. According to the communication, a good number of economists consider that a formula combing a broad base of taxation and moderated tax rates is more effective as it would cause fewer distortions. It is also appropriate to ensure that the repartition mechanism produces fair and equitable results. Finally, specific incentives and deductions should be limited in number, appropriately targeted and duly justified. Mr Kovacs did not wish to rule out the possibility for member stats to foresee tax incentives and exemptions, citing for example the incentives in favour of research. The Commission, however, warns that member states should acknowledge that the harmonised corporate tax base would not be able to reproduce all the characteristics of their current tax base.
When asked about support among member states for the Commission project, Mr Kovács spoke about the round table discussions at the informal Ecofin Council in Vienna in April 2006 (see EUROPE 9171): 12 member states, including Bulgaria and Romania, strongly support the project; eight member states give it cautious support; seven, including Ireland, Malta, Latvia, Lithuania, the United Kingdom and Slovakia express doubts or have concerns. In Ireland, the issue of harmonisation of corporate taxes burst into the electoral campaign ahead of national elections on 24 May. On Monday 30 April, the Taoiseach Bertie Ahern vigorously rejected any prospect of corporate tax harmonisation. “This is not the harmless, sensible, logical, technical adjustment which some people are trying to portray it as. We regard the proposal as little more than a Trojan horse for harmonised corporation tax and that is why we will resolutely resist and oppose it,” he said. European Internal Market Commissioner Charlie McCreevy is also against CCC (see EUROPE 9365). (mb)