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Harmonizing EU tax rules is good but commitment to tackle race to the bottom is a must
Today the European Commission released its fourth package to combat tax evasion and tax avoidance. This corporate tax reform package notably includes a proposal to harmonize the tax base among EU 28 member states. Called the Common Consolidated Corporate Tax Base (CCCTB), it undoubtedly shows the willingness of the European Commission to remain a key stakeholder in the fight against tax-dodging, as member states compete on both the corporate tax base and the corporate tax rate.
Oxfam International EU Policy Advisor on Inequality and Taxation, Aurore Chardonnet, said:
“Oxfam supports the ongoing efforts of the European Commission to reopen discussions on tax base harmonization and to push ahead in the fight against tax avoidance. The complexity and dysfunctions of tax policies among countries are used like a loophole by multinationals, reducing their tax bills to a minimum. A common tax base, and later on a consolidated tax base, would simplify tax rules and prevent companies being able to shift their profits around, especially to tax havens.
“Despite some worrying new elements, the first phase of this tax base harmonization – the CCTB – would be an improvement to the current situation. But this will not address the tax race to the bottom and could even increase the ongoing tax rate competition if both issues are not tackled simultaneously. That is why Oxfam is asking the Council of Finance Ministers [ECOFIN] to come up with objective criteria to set an effective and coherent list of tax havens that includes countermeasures. The agency also requests the European Commission to propose ways to combat harmful tax practices.
“Tax discrepancies among member states seem so high now that the EU might need years to agree on this new package. Regardless, Oxfam urges EU institutions and EU governments to act swiftly.”
- Today 25 October 2016, the European Commission released the corporate tax reform package which includes:
- A directive on a common Corporate Tax Base (CCTB)
- A directive on a Common Consolidated Corporate Tax Base (CCCTB)
- A directive amending the Anti-Tax Avoidance Directive (ATAD 2) to revise rules on hybrids mismatches within the EU and with third countries.
- A Council Directive on Double Taxation Dispute Resolution Mechanisms
- A first proposal for CCCTB was issued in 2011 and failed to be adopted by EU countries. This time, the European Commission proposes a 2 steps approach involving first harmonizing rules to calculate what to tax and a second phase implying taxable profits are no longer determined at the level of individual member states, but for the EU as a whole (consolidation).
- The CCTB (phase 1) contains some worrying elements such as notional interests (Allowance for Growth and Investment), a super deduction for R&D costs and a cross border loss relief mechanism allowing offsetting losses across countries.
- In January 2016 the European Commission released the Anti-Tax Avoidance Package (ATAP) bringing together initiatives aiming at enhancing effective taxation and transparency in the European Union and beyond. The package draws most of its inspiration on the Base Erosion and Profit Shifting (BEPS) project on international tax reforms launched by the Organization for Economic Cooperation and Development (OECD) in 2013.
- In November 2015, Oxfam and three other organizations jointly published "Still Broken: Governments must do more to fix the international corporate tax system", a briefing note that points out why the OECD BEPS package is not enough and calls for a more effective approach against corporate tax havens. The briefing note shows how much countries are losing revenues for not adopting a more cooperative approach on tax.
- In March 2015, Oxfam published “Pulling the Plug – How to stop corporate tax dodging in Europe and beyond”, a briefing note that explores some of the ways to fight corporate tax avoidance in the European Union and explains why it is vital for the EU to adopt legislation against tax dodging as soon as possible.
Florian Oel, email@example.com / +32 2 234 11 15 / +32 473 56 22 60