Thursday 22 March 2018

The A to Z of CCCTB - Europe's latest controversial move over tax

Photo: Getty Images
Photo: Getty Images

Sarah Collins

Q: What is the CCCTB?

A: The EU's common consolidated corporate tax base, a single set of tax rules for large multinationals operating within the 28-member EU. The idea is to eliminate national tax loopholes and treat companies in a group as one entity in the EU for tax purposes.

Q: How would it work?

A: First, it sets out a single definition of taxable profits (including deductions, reliefs and credits) for multinationals with global revenues over €750m. Second, it says companies should pay their final tax bills in countries where they have their sales, assets and payroll (known as "consolidation"). The second phase would only apply once the first is agreed.

Q: Is it anything to do with corporate tax rates?

A: No, it targets how corporate taxes are calculated. But experts - and even the Commission - say it could have an indirect effect on tax rates if countries find they are losing out on corporate tax revenues.

Q: Why does it sound familiar?

A: This is the second time around for the CCCTB. A first draft, published in 2011, was officially withdrawn by the EU this week after getting bogged down in technical wrangling and political infighting.

Q: So what's different now?

A: The Panama Papers and other tax rows are pressuring governments to clamp down on multinationals over tax, making the EU more confident it can win support for the proposal now. The EU has also changed the 2011 proposal slightly, making it mandatory for large companies (it was optional before) and leaving the more controversial "consolidation" bit till later.

Q: What are the benefits?

A: Companies would only have to file a single tax return, and would get EU-wide deductions for R&D and equity injections, and relief on cross-border losses. The Commission estimates it would boost growth by 1.2pc, investment by 3.4pc, employment by 0.6pc, and cut administrative costs for companies by 2.5pc.

Q: Why is it controversial?

A: It has a formula to decide where multinationals should pay taxes, cutting close to the bone on sovereignty and potentially eating into some countries' corporate tax revenues.

Q: Who is in favour of it?

A: France, Germany and Italy, as well as many companies, large and small, as it simplifies tax returns. Small firms, who can't afford to shop around the bloc for tax deals, back it.

Q: Who is opposed to it?

A: Sweden, the Netherlands, Poland, the UK, Denmark and others had problems with the 2011 draft. Malta and Slovakia, who will steer initial talks on the 2016 version, were also sceptical in the past. Other low-tax countries, such as Cyprus and Bulgaria, are likely to have issues. The Irish business and employers' federation is not keen on it.

Q: Does Ireland have a veto?

A: Yes. Tax matters require the unanimous approval of all 28 EU countries.

Irish Independent

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