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With its scheduled adoption, on 2 May, of an interim report on the Common Consolidated Corporate Tax Base (CCCTB), the European Commission will enter the final straight of one of the biggest tax projects ever undertaken at EU level. Europolitics is able to unveil today the content of one of the very final versions of the document that will be put to all the commissioners, probably as an A item' (without debate).

The report presents the CCCTB as "a major contribution to the success of the internal market". In the face of 27 different tax systems, the advantages of the CCCTB are spelled out yet again. It is expected to "reduce appreciably the costs of compliance for businesses operating in the internal market". The common tax base should also "solve problems related to transfer prices, making it possible to consolidate profit and loss". It is likely to "simplify numerous international restructuring operations" and will do away with "many cases of double taxation".

In its introduction, the document also points out that the member states cannot take a final decision on whether or not to support the project without a formal proposal from the Commission, which is still slated for 2008.

The Commission notes at this stage that the latest working paper, dated 20 November 2006 (1), resulted in certain advances in the technical work under way: the definition of taxable income (which will serve as the starting point of the CCCTB), international matters, financial institutions and consolidation problems. The report states that a method for sharing the tax base has already been agreed by the working group, but that now a real mechanism has to be devised, one that can produce "fair and balanced" results.

It goes without saying that the proposal for the creation of a common tax base will have to be accompanied by a parallel impact study. Work has already begun and the quality of the study will depend on the quality of the statistics to be provided by the member states, observes the Commission. The report notes that the future impact study must mention the existence of a number of options, including the scenario of maintaining the status quo.


The Commission's caution (its own hesitation?) is reflected in its wish to secure the consent of the EU institutions on three key questions highlighted in the report:

1. The EU will have to decide for or against the introduction of a genuine common tax base with consolidation (thus necessitating a sharing mechanism). The EU executive takes the view that the CCCTB should be matched with a consolidation mechanism that will make it possible to benefit to the full from the common base.

2. The question of the optional nature of the CCCTB will also have to be settled. For the Commission, the CCCTB should remain optional. The report states that companies should be able to continue to apply existing rules or opt for the common tax base. In the version of the report obtained by Europolitics, there is mention of the possibility of deleting a sentence in which the Commission expresses the conviction that this approach is the best.

The report also confirms that it is still out of the question to extend the work under way to the possibility of introducing a common tax rate (an idea to which a number of states are vehemently opposed). The Commission also notes that the process must lead to a uniform and simpler system and that the tax base that is finally selected will have to be "wide".

3. Two other questions that "will have a major impact" on the final legislative proposal will also have to be answered. First, there is a need to pinpoint how the financial sector should be incorporated into the CCCTB mechanism. The sector itself leans toward the inclusion of financial activities in the CCCTB. That said, "there is less consensus on the nature of the particular rules that will be needed to take the sector's characteristics into account". Another problem to be solved is the implementation of an appropriate administrative framework, preparation of which has barely begun. The idea of a one-stop-shop' is one possible option, moreover. The principle is to avoid 27 different procedures.

The Commission's communication is available at => subscribers => advanced search => reference = 78507

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Publication:European Report
Geographic Code:4E
Date:Apr 30, 2007
Previous Article:WEEK FROM 30 APRIL TO 6 MAY.

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