More Liberal Voices. The Effect of Corporate Tax Base Harmonization in the EU

The European Commission (EC) has renewed its proposals on the Common Consolidated Corporate Tax Base (CCCTB) initiative. The initiative refers to two proposals by the European Commission for an EU-wide tax code aimed at companies operating in more than one Member State. Under CCCTB, businesses would compute their annual EU taxable income and apportion shares of it to different Member States according to a set formula, taking into account revenue, employee numbers, wages and assets. Under CCCTB, each Member State would apply national tax rates on profits of its companies. The renewed proposal introduces a two-step approach: efforts will first concentrate on compiling the rules for the Common Corporate Tax Base (CCTB), and consolidation (CCCTB) will be left for a later stage. According to the EC, Member States will have to transpose the CCTB directive into their national laws by 31 December 2018 and CCCTB directive by 31 December 2020.

Proponents of corporate tax harmonisation claim that the proposal will:
– create a better integrated market and secure free trade by removing tax obstacles;
– promote sustainable growth and investment;
– make the EU tax system easier to comply with;
– alleviate the burden of tax administration (both for taxpayers and tax administrators);
– guarantee even competition conditions;
– safeguard national tax revenues;
– improve tax transparency; and
– reduce tax avoidance (profit shifting, double non-taxation) and aggressive tax planning opportunities.

However, there are multiple reasons to suggest though that CCCTB is not the best tool to achieve these objectives. The present policy brief looks into the implications behind and effects of the corporate tax base harmonization in the European Union.

Download the full policy brief here.