Over the past month, there have been a number of developments in various areas of tax at EU level. The most important one is the re-launch of the CCCTB, where as a surprise move, the Commission presented both the common corporate tax base and consolidation proposal at the same time.
On 25 October, the European Commission tabled a new package of measures on corporate taxation, including proposals that aim to harmonise corporate tax by 2021. The Commission propose to do this through establishing a Common Consolidated Corporate Tax Base (CCCTB), which replaces a stalled proposal from 2011. This re-launched CCCTB will be implemented through a staged two-step process. Firstly, the common base is to be agreed swiftly and then consolidation is to be introduced soon afterwards.
The CCCTB will create a single set of rules for companies to calculate their taxable profits in the EU. This will mean that cross-border companies will only have to comply with one, single EU system for computing their taxable income. It will be mandatory for large multinational groups which have the greatest capacity for aggressive tax planning to ensure that companies are taxed where they really make their profits. The proposals aim to eliminate loopholes associated with profit-shifting for tax purposes and encourage companies to use equity finance instead of debt. It also seeks to support innovation through tax incentives for research and development activities.
The package also comprises two complementary proposal for an improved system to resolve double taxation disputes in the EU and bolster existing anti-abuse rules. These new measures aim to stop companies from exploiting loopholes, known as hybrid mismatches, between Member States’ and non-EU countries’ tax systems to escape taxation.
These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption. For more information, please see the full CCCTB proposal here.
Other tax announcements include conclusions by the Council on tax transparency, a summary report on VAT fraud and progress being made on the Financial Transaction Tax (“FTT”). On 11 October, the Economic and Financial Affairs Council adopted conclusions in response to a Commission communication on tax transparency following the Panama Papers revelations. The conclusions focus on the continued need to prevent large-scale funds being concealed as this impedes efforts to clamp down on tax evasion, money laundering and terrorist financing.
The Commission’s Communication in July 2016 recommended a coordinated approach to prevent tax abuse, at both EU and international levels. Whilst progress has been made at the EU level, the Council stated that loopholes remain and further action is expected.
The Council also approved a taxation agreement with Monaco, giving tax administrations improved cross-border access to information on the financial accounts of each other’s residents to improve tax compliance by private savers.
On 12 October, the Council published a summary of the results of the discussions on experts level on VAT fraud and its inclusion in the draft Directive on the fight against fraud to the Union’s financial interests by means of criminal law (the “PIF Directive”) during the Netherlands Presidency, as completed by Slovak Presidency, with a view to reaching a compromise solution with the European Parliament.
An updated draft text of the Directive is annexed to the summary reflecting the state of play with the Presidency following the latest meetings in the High Level Working Party on Tax Questions (“HLWP”) and the Coordinating Committee in the area of police and judicial cooperation in criminal matters (“CATS”). However, the Presidency is still receiving technical proposals from delegations and so adjustments to the draft could still be necessary in order to reach a compromise.
On 10 October, Commissioner Pierre Moscovici released a statement on twitter to say that ’excellent progress’ had been made on the FTT and that ’a final agreement has never been closer‘. It had been rumoured that the FTT may be replaced by a Financial Activity Tax proposal but these suspicions have been put into doubt by Pierre’s statement. A legal text is now being drafted which will seek political agreement in the upcoming weeks. However, given that such statements of progress being ’just around the corner’ have been repeated periodically for the past four years, we will have to wait and see if the proposal will finally see the light of day this time around.O