European business groups withdraw support for EU common corporate tax

Out-Law News | 19 Jun 2015 | 4:14 pm | 2 min. read

Business lobby group BusinessEurope has withdrawn its previous support for a proposed European common consolidated corporate tax base (CCCTB) due to changes that make it mandatory for multinational companies.

UK business lobby group the Institute of Directors has described the CCCTB as "unhelpful political populism".

"European business fully shares the European Commission’s objective to fight tax fraud and evasion as it creates competitive distortions at the expense of the vast majority of businesses who paid nearly €2 trillion of taxes in the EU in 2012," Emma Marcegaglia, president of BusinessEurope, said. "But efforts to fight fraud and evasion must not undermine the principle of fair tax competition whereby EU member states are able to set their own tax policies and rates within the international rules that they have agreed on."

CCCTB has been under discussion in the European Union since 2011 according to the Commission website. This week the European Commission said that it will present a new proposal in 2016, broken into smaller, more manageable stages. This proposal will include a mandatory CCCTB for multinational companies, it said.

When the CCCTB was first proposed it was an optional system, with the primary focus on simplifying the tax environment for businesses in the single market, the Commission said.  Since then, however, the potential to use CCCTB as an anti-avoidance tool has been more widely recognised, it said.

"We have always been clear that to maintain the support of the business community, the CCCTB must both be optional for companies and encourage them to expand into new markets within the EU by allowing consolidation of profit and losses in different EU Member States," Marcegaglia said.

"We are concerned that the expected new CCCTB proposal will be mandatory for companies and will not allow for full consolidation. US companies are able to consolidate profit and losses between states; the CCCTB must offer this possibility for EU companies," she said.

The Institute of Directors (IoD) said the plan "risks blurring the line between legitimate tax planning and abusive tax avoidance".

Stephen Herring, the institute's head of taxation, said:  "The attempt to relaunch the stalled CCCTB project smacks of unhelpful political populism. Each European government faces different economic pressures and corporate tax is an important tool in helping them adjust to changing circumstances. The EU should not be trying to impose a straightjacket on its members, particularly as it will almost certainly increase the level of tax for business."

"While IoD members have never supported abusive tax avoidance, the proposals in this area risk damaging Europe as a destination for global inward investment," Herring said.

The Commission is also consulting on possible public disclosure requirements for multinational companies, building on the tax transparency package published in March 2015.

As announced in March, the Commission already intends to require member states to automatically exchange information about whether they have granted any tax rulings or letters of comfort to particular multinational companies. Other member states could then request more information about particular rulings. This proposal was prompted by a series of investigations by the Commission into tax rulings provided to multinational companies in Luxembourg, Ireland, Belgium and the Netherlands.

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