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EU Parliament Backs Mandatory CCCTB

by Ulrika Lomas, Tax-News.com, Brussels

26 April 2012


The European Parliament has voted in favour of making mandatory the implementation of a Common Consolidated Corporate Tax Base among European Union member states despite sustained opposition from some nations.

The resolution - to make mandatory the introduction of the CCCTB after a transitional period - was adopted with 452 votes in favour, 172 against and 36 abstentions, at a Parliament plenary on April 19. It was agreed that, initially, the CCCTB would only apply to European cooperative societies, which are by nature cross-border. After five years, it would apply to all companies except small- and medium-sized enterprises (defined as those companies which employ less than 250 people and either have a turnover of less than EUR50m or a balance sheet of less than EUR43m), which could opt in if they so wish.

The CCCTB system would give companies a single set of rules for calculating their taxable profits, rather than having to comply with differing accounting rules in each member state in which they operate. Among its benefits, a CCCTB would significantly reduce transfer pricing requirements on multinationals when assessing a transaction between European member states for tax purposes.

Marianna Thyssen, the lead Member of European Parliament on the issue, commented: "This harmonized system for calculating the tax base makes it possible for companies to consolidate the results of their individual branches, which allows them to compensate for any losses a group member might have. This makes it easier for companies to have and keep branches in different member states and it reduces red tape. In addition, the system ensures that economic and social aspects are more important than purely fiscal reasons when companies choose their locations."

Welcoming support received from the European Parliament, Commissioner Algirdas Semeta, praised Parliament for its "very strong" support for the proposals: "[A CCCTB] will save EU businesses billions of euros and help attract more foreign investors into Europe. [A common tax base] will eliminate huge administrative burdens, heavy compliance costs and legal uncertainties that companies currently face when operating in more than one member state. The European Parliament has today given its backing. It is now up to member states to keep up the momentum and adopt this proposal, which not only reflects the spirit of the Single Market but is also an essential element in our growth agenda for Europe."

The CCCTB is however fiercely opposed by certain member states, notably Ireland, who see the plans as an attack on their fiscal sovereignty and the first step towards full corporate tax harmonization. Studies also suggest that, far from levelling the corporate tax playing field in the EU, it would distort investment and effectively redistribute tax revenues between member states.

Parliament's resolution also differs from the Commission's proposals, which at the moment only envisage the CCCTB being rolled out on a voluntary basis.

TAGS: tax | business | law | accounting | corporation tax | group taxation | small and medium-sized enterprises (SME) | multinationals | transfer pricing | tax reform | European Union (EU) | Europe

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