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European Commission Plods On Towards Harmonized Tax Base

by Robin Pilgrim,, London

05 October 2006

Last week in London, László Kovács, European Commissioner for Taxation and Customs Union, talked to the Confédération Fiscale Européenne (CFE) about the European Commission’s Common Consolidated Corporate Tax Base (CCCTB) project and tax competition between EU member states.

Paul Morton, CFE President, said: “I am delighted that we are having this dialogue with Commissioner Kovács on topics that have a major impact on the European tax arena. Potential tax simplification across the EU is an important step in ensuring that we remain competitive in a global market.”

Kovács told the CFE that he plans to publish a progress report on the CCCTB project during the German presidency of the EU (January to June, 2007) and is committed to putting forward a legislative proposal on the initiative by 2008.

Although many EU member states support the idea of a harmonized tax base (not the same as harmonized tax rates), some countries, notably the UK and Ireland, are bitterly opposed to it - and it would require unanimous agreement to come into force. Kovács said he was at a loss to understand the stance of some member states, notably the UK and Ireland."Why be opposed to a proposal that has not yet been made?" he asked. "Wait and see what the final proposal is like and then decide.

An official Communication by the Commission last April stated:

"Encouraging progress is being made by the Commission-led expert working group on the Common Consolidated Corporate Tax Base (CCCTB). The CCCTB will enable companies to follow the same rules for calculating the tax base for all their EU-wide activities, thereby removing many of the tax obstacles to companies operating across the Internal Market."

"It will increase companies' efficiency, improve their competitiveness and significantly reduce their compliance costs...and general administrative burdens. Member States will retain full sovereignty over their tax revenues as they will continue to set their own national tax rates. The European Commission plans to present its legislative proposal in 2008."

The main conclusions of the Communication were that:

  • The CCCTB should be simple and uniform with as few as possible exceptions;
  • The tax base should be consolidated and optional for companies;
  • The rules for calculating the CCCTB should be self-standing and not formally linked to the international accounting standards (IAS/IFRS); and that
  • The current approach of working in close cooperation with Member States experts, business and academia is the most effective.

The CCCTB working group was created in September 2004. It is composed of experts from the European Commission and the Member States, but is extended on an ad-hoc basis to experts from business and academia. The working group meets quarterly.

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