CCCTB round 2: an exercise in unification or polarisation?

Lucinda Ritchie // 12 July 2017

Originally suggested and then subsequently shelved in 2011, the Common Consolidated Corporate Tax Base is a policy designed to create a unified set of rules to calculate companies’ taxable profits across the EU. Companies engaging in activity in different member states would be allowed to offset any losses in one country against profits in another, these taxable profits would then be shared between the member states where these companies are active. Member states would then be able to tax their share of the profits at their own national tax rate.


Brussels has suggested that this potential solution to corporate taxation would streamline the taxation process for both member states and corporations alike, since companies would need only to fill out a single tax return. It is also argued that this measure would cut red tape, reduce compliance costs for firms in the single market, promote investment in the EU, and close tax-avoidance loopholes.


Such a crackdown on offshore activity, and tax evasion in general, can be seen to be a direct consequence of both the 2008 Liechtenstein tax affair and the 2015 Panama Papers controversy, as well as a growing perception in Brussels of the increasing imbalances in various Member States’ receptiveness to “tax efficient” corporations through comparatively relaxed rates. This diagnosis is far more of a reality than a theory since the Commission’s legislative proposal of 21 June 2017 explicitly cites the Panama Papers scandal to be a distinct landmark in the contextual landscape of this initiative.


Whilst efforts to respond to such an event and put in place preventatives for their reoccurrence are laudable, it is necessary to question whether there are any meaningful differences between this proposal and that of 2011. In response to queries of exactly this nature from Member States, the commission has emphasised that the re-vamped CCCTB will be split into two separate proposals, which can then be implemented in stages. This is supposed to have the simultaneous effect of calming Member States’ doubts through two-part discussion, whilst maintaining the full clout of the original proposals but in digestible instalments.


Caution on the Commission’s part is advisable considering that this policy is being resurrected from rather inglorious ashes, and also that the 23 May 2017 discussion on the matter resulted in objections from seven weighty States: the UK, Ireland, Sweden, Denmark, the Netherlands, Malta and Luxembourg. With this in mind, Moscovici’s desire for consensus and unanimity should be tempered by willingness to negotiate and compromise.


In many ways this piece of legislation seems logical and efficient, however there are more ideological issues at stake- the most resonant of these being the consequent curtailing of member states’ individual tax sovereignty. With Euro-sceptics across the continent decrying the encroachment of Brussels into all aspects of domestic policy, this new scheme seems to play directly into the euro-sceptic rhetoric that we are hurtling towards the creation of a European super-state. Indeed, were such aims explicit, then this policy would be a natural chapter in this overarching narrative of ever increasing integration.


There exists no one proven method of taxing most efficiently or fairly, so there is a case to be made for the continued operation of a wide diversity of national tax rates so as to enable a comparison of efficacy.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).


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