EU proposes common corporate tax base
Thursday March 17 2011 | 05:42 AM

The proposed Common Consolidated Corporate Tax Base (CCCTB) would not affect member states’ right to set their own tax rate. Therefore, the move will not affect Ireland’s important, but contentious, 12.5pc corporation tax rate.

The European Commission said the aim of the CCCTB is to reduce the administrative burden, compliance costs and legal uncertainties that businesses currently face in having to comply with up to 27 different national systems for determining their taxable profits.

Under the new arrangements, companies would be able to consolidate all the profits and losses they incur across the EU.

When it comes to corporate taxation, there are still serious obstacles to the Single Market which are holding businesses back. For one, firms cannot offset their losses in one member state against profits in another. This puts some small businesses off expanding and large companies face massive and complicated costs.

The CCCTB aims to overcome these problems by offering companies one single set of corporate tax base rules to follow and the possibility of filing a single tax return with one administration for their entire activity within the EU.

On the basis of this single tax return, the company's tax base would be shared out amongst the countries in which it is active. The specific formula will take into account assets, labour and sales. After the tax base has been apportioned, member states will be allowed to tax their share at their own corporate tax rate.

The CCCTB would be optional for companies. This means that those that felt that they would benefit from a harmonised EU system could opt-in, while other companies could continue to work within their national systems.

The Commission estimates that the CCCTB will save businesses about €700m in reduced compliance costs, and €1.3bn through consolidation.

Algirdas Šemeta, commissioner for taxation said, "The CCCTB will make it easier, cheaper and more convenient to do business in the EU. It will also open doors for SMEs looking to grow beyond their domestic market. Today's proposal is good for business and good for the EU's global competitiveness."