05/04/21

INTERNATIONAL TAX: European Commission may revive old plan for a single EU tax base.

As published on independent.ie, Saturday 3 April, 2021.

Ireland’s corporate tax strategy could come under further pressure as the EU mulls a revival of a decade-old multinational tax plan.

The European Commission is to set out “a holistic and ambitious vision” for business taxes at the end of the month, where it will “take stock” of stalled talks on a proposal known as the common consolidated corporate tax base (CCCTB).

However, the exact timing and focus of the draft are still in flux given US president Joe Biden’s recent move to onshore multinational taxes and his bid for a “strong minimum tax” at global level in talks led by the Organisation for Economic Cooperation and Development (OECD).

A public consultation on the Commission’s plans closed on Thursday and proposals to revive the CCCTB were supported in two submissions.

The Danish Chamber of Commerce said the CCCTB should be “promoted and taken more seriously by member states”, while Dutch-headquartered travel platform Booking.com said it would be “interesting to look into the possibility of relaunching” it.

“A decision on whether or not to adopt a CCCTB is ultimately a political one to be taken by the member states given that it will involve them giving up or pooling part of their tax sovereignty,” said Chris Morgan, head of global tax policy at consulting firm KPMG, in his submission to the consultation.

“A CCCTB should reduce any tax competition between member states and provide greater transparency over the tax charge.”

The CCCTB proposal dates back to 2011 and sets out to end profit-shifting between companies in large groups, treating them as one entity in the EU for tax purposes.

It was revived in 2016 and split into two draft laws, with the first setting out a single definition of taxable profits, including deductions, reliefs and credits.

The second, more controversial, law would force large firms to pay their final tax bills where their sales, assets and payroll are based.

In its corporation tax roadmap in January, the Department of Finance said efforts to stop profit-shifting were best handled by the Paris-based OECD in its ‘Inclusive Framework’, which is due to report back in July.

The OECD process has been revived by support from the Biden administration after the Trump presidency killed it.

“The longstanding CCCTB proposal remains under discussion, albeit with limited momentum,” the roadmap said. “Ireland continues to believe that the work at the Inclusive Framework on realigning taxing rights globally remains a more appropriate approach to corporation tax reform.”

The Commission will set out its thinking on business taxes in a communication due for release on April 27.

It will also look at an EU-wide digital levy, which it had pledged to table by June if there was no progress in OECD talks.

In a document issued with public consultation, the Commission said the single market and digitalisation had intensified tax competition and risked a race to the bottom on tax revenues.