In a speech in Brussels, Semeta said that while tax rates under his plan would continue to be overseen by the individual nations, implementing a single system for calculating income would save multi-national companies as much as €2bn ($2.8bn, £1.7bn) a year in compliance costs, thus helping to ease cross-border trade and enabling companies to be more competitive.
The tax collected from these multi-nationals under the proposed system would be divided up among the EU countries in which the companies’ operate, while the various national governments would still tax them according to their national rates.
“The CCCTB (Common Consolidated Corporate Tax base) will make it easier, cheaper and more convenient to do business in the EU,” Semeta said in his speech.
“It will offer companies the choice of applying just one set of rules and working with just one administration, rather than 27 different ones, when filing their corporate tax returns.
"It is about ensuring that the cross-border nature of enterprises is properly recognised, by allowing them to offset losses in one Member State against profits in another.
“It is about removing the need for the highly-complicated, highly-costly and highly-contentious transfer pricing system that is in place today for intra-group transactions.
"In short, the CCCTB is about eliminating huge administrative burdens, heavy compliance costs and legal uncertainties that companies currently face when operating in more than one state."
The proposal would require the support of all 27 member countries to become law.
Criticisms
Among those critical of the CCCTB was the Wall Street Journal, which in an editorial, noted that “even on its own terms, the harmonised tax base seems unlikely to deliver what it promises”.
The US business newspaper noted that a recent Ernst & Young report had found companies’ overall compliance costs “would actually increase by 13%, on top of ‘substantial one-off costs in the transition to a new system’,” and that most of the businesses E&Y had looked at “would see their corporate tax burdens increase, since the Commission’s formula would allocate a greater proportion of taxable income to countries with higher rates”.
The WSJ continued: “The EU’s ongoing obsession with its member countries’ taxation regimes, even when it’s unclear how some of those countries plan on retaining profitable industries to tax at all in the coming years, is not the solution to enhanced competitiveness that the EU says it’s after.
"But we suppose it is one way to avoid tackling the real barriers to European business.”.
Supporters of the plan included BUSINESSEUROPE, a Brussels-based organisation that represents small, medium and large companies in 34 countries around the world. It said the proposed tax system would help to alleviate “the lack of cross-border profit and loss relief within the EU”, which it argued was a source of additional costs for many businesses and a hindering factor for growth and jobs.
The CCCTB would also provide an answer to BUSINESSEUROPE said were “large numbers of transfer pricing disputes in Europe”, which it noted frequently result in international double taxation for extended periods and sometimes even permanently.
The organisation also stressed that its support was conditional on the common tax base being optional (“ie not replace national corporate tax systems”), and on the EU leaving the decision on tax rates to the individual national governments.
