The European Commission presented on 17 June an Action Plan to fundamentally reform corporate taxation in the EU. The Action Plan sets out a series of initiatives to tackle tax avoidance, secure sustainable revenues and strengthen the Single Market for businesses. Collectively, these measures are intended to significantly improve the corporate tax environment in the EU, making it fairer, more efficient and more growth-friendly.
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Key actions of the Action Plan include a strategy to re-launch the Common Consolidated Corporate Tax Base (CCCTB) and a framework to ensure effective taxation where profits are generated. The Commission is also publishing a first pan-EU list of third-country non-cooperative tax jurisdictions and launching a public consultation to assess whether companies should have to publicly disclose certain tax information.
The rules that govern corporate taxation in the EU today are out-of-step with the modern economy. Uncoordinated national measures are being exploited by some companies to escape taxation in the EU. This leads to significant revenue losses for Member States, a heavier tax burden for citizens and competitive distortions for businesses that pay their share.
To redress this situation, the Action Plan sets out a new EU approach for fair and efficient corporate taxation. This will be achieved through a series of initiatives to be taken in the short, medium and long-term. These build on the measures already set out in the Tax Transparency Package, which the Commission presented in March. The measures outlined in this Action Plan also echo ongoing work at the OECD to limit tax base erosion and profit shifting.
KEY ACTIONS
Re-launching the Common Consolidated Corporate Tax Base (CCCTB)
The Commission will re-launch its proposal for a Common Consolidated Corporate Tax Base (CCCTB), as a holistic solution to corporate tax reform.
The CCCTB can deliver on all fronts, significantly improving the Single Market for businesses, while also closing off opportunities for corporate tax avoidance. Negotiations are currently stalled on the Commission’s 2011 proposal for a CCCTB. However, there is a general consensus that they need to be revived, given the major benefits that the CCCTB offers. The Commission says work will begin immediately on a new proposal to introduce a mandatory CCCTB through a step-by-step approach. This will allow Member States to progress more quickly on securing the common taxable base. Consolidation will be introduced as a second step, as this has been the most difficult element in negotiations so far. The Commission will present this new proposal as early as possible in 2016.
Ensuring Effective Taxation
The Action Plan sets out the path for effective taxation in the EU, which is the notion that companies should pay a fair share of tax in the country where they make their profits. There are a number of ways to achieve this, without harmonising corporate tax rates across the EU. For example, the Commission is proposing measures to close legislative loopholes, improve the transfer pricing system and implement stricter rules for preferential tax regimes, among other things. These initiatives should also help to advance the ongoing debate between Member States to define and agree on an EU approach to effective taxation.
Increasing Transparency
The Action Plan sets out the next steps for greater tax transparency within the EU and vis-à-vis third countries. This builds on the measures already envisaged in the Tax Transparency Package, adopted in March. To launch a more open and uniform EU approach to non-cooperative tax jurisdictions, the Commission has published a pan-EU list of third countries and territories blacklisted by Member States. This can be used to screen non-cooperative tax jurisdictions and develop a common EU strategy to deal with them. As such, it will reinforce Member States’ collective defence system against external threats to their revenues.
The Commission is also launching a public consultation on to gather feedback on whether companies should have to publicly disclose certain tax information, including through Country-by-Country Reporting (CbCR).The consultation, together with the Commission’s ongoing impact assessment work, will help to shape any future policy decisions on this issue.
BACKGROUND
The Action Plan for Fair and Efficient Corporate Taxation is part of the Commission’s ambitious agenda to tackle corporate tax avoidance, ensuring a fairer Single Market and promoting jobs, growth and investment in Europe.
The Commission is rapidly delivering on the commitments made in its 2015 Work Programme to clamp down on tax evasion and tax avoidance, and ensure that companies pay tax where they generate profits.
As a first step, the Commission proposed a Tax Transparency Package in March to create more openness and cooperation between Member States on corporate tax issues. A key element in the Package was a proposal for the automatic exchange of information on tax rulings. This proposal received unanimous political support from Finance Ministers at the Informal ECOFIN in April. Member States are now discussing it at technical level with the aim of reaching agreement by the end of the year.
Today’s Action Plan represents the second and more comprehensive step towards reforming corporate taxation in the EU
Website on non-cooperative tax jurisdictions
