Negative reaction to CCCTB draft laws

DOMESTIC REACTION to the EU Commission’s Common Consolidated Corporate Tax Base (CCCTB) proposals was predictably negative yesterday.

Business group Ibec said it believed the proposals were unlikely to make Europe more attractive as an investment location.

“CCCTB is unlikely to reduce the cost of doing business in the EU. Instead of making Europe’s corporate tax systems simpler it will add a further layer of complexity,” said its director general Danny McCoy.

“The proposals represent an excessive and unnecessary change to how corporate income tax is assessed and present a range of uncertainties for European business.”

The Irish Taxation Institute was also critical of the plan for a common tax base.

“It is important that the EU understands and appreciates the potential compliance costs and the impact on the corporate tax burden resulting from this proposed major change,” said president Andrew Cullen.

“The EU is competing for investment in an international environment where certainty, return on investment and compliance costs are critical to multinational investment decisions.”

The American Chamber of Commerce in Ireland, which represents more than 600 companies, said that while the proposals need to be examined thoroughly, it agreed with the Taoiseach’s assessment that a common consolidated tax base is tax harmonisation by “the back door”.

Chartered Accountants Ireland said, meanwhile, that it was hard to see how the proposed new rules would be acceptable either to EU member states or companies operating in them.

Q&A

What is the Common Consolidated Corporate Tax Base (CCTB)?

It is a single set of rules that companies operating within the EU could use to calculate their profits for tax purposes.

It would mean a firm doing business in more than one member state would have the option of filing just one tax return for all of their EU activities.

How would it work in practice?

Companies could add up all of their profits and losses across the EU, with a single, consolidated tax return being used to establish what is liable for tax. Then, all the member states in which they operate would be entitled to a portion of the tax due, according to a specific formula.

This would be based on three factors of equal weight: assets, labour and sales – the three components of profit. The tax return would be filed in the place where most business is done, with that member state then co-ordinating the follow-up.

What is the argument for a CCTB?

It would make it much cheaper and easier for businesses. Rather than dealing with (potentially) 27 different tax systems, they would only need to engage with one. It would also minimise the risk of over-taxation.

What is negative about this?

Many argue that it is a first step towards harmonisation of tax rates. Thus far, however, national tax rates are not in the picture. There are, on the other hand, some frightening estimates on how much the Irish tax take from multinationals would fall under the proposed CCTB system as the share of profits to be taxed here would decline.

Would it be mandatory?

No, so companies that didn’t want to get involved, perhaps because they only operate in one country, could opt out.

– CHARLIE TAYLOR