The Effect of Harmonisation of the Corporate Tax Base in the EU

Lithuanian Free Market Institute, November 2015

The European Commission has re-launched the Common Consolidated Corporate Tax Base (CCCTB) initiative. CCCTB refers to a proposal under which businesses would compute their annual EU taxable income and apportion shares of it to the different member states where they operated. Each member state would tax the profits of the companies in its state at their own national tax rate.

Proponents of corporate tax harmonisation claim that the proposal is designed to create the common market and secure free trade by removing tax obstacles; simplify compliance with the EU tax system; alleviate the burden of tax administration (both for taxpayers and tax administrators); guarantee even competition conditions; safeguard national tax revenues; improve tax transparency; and reduce tax avoidance (profit shifting and double non-taxation) and aggressive tax planning. There are, however, strong reasons to believe that CCCTB is not the best tool to achieve these objectives.

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