Massive support for EU Common Consolidated Corporate Tax Base

An EU-wide study by KPMG has found substantial support for the European Community's proposed Common Consolidated Corporate Tax Base (CCCTB). The study sought the views of tax professionals in over 400 companies across the European Community, and 78 per cent of respondents approved of the CCCTB.

The rationale behind the CCCTB is to provide a consolidated tax base for companies in their activities across the European Union. If it all works as intended, a company in a member state would not need to feel its way around the different company tax regimes in all the countries of the European Community in which it does business. Instead, the CCCTB will provide a uniform formula according to which the company's profits should be calculated. The profits so determined will be allocated to the countries where that company does business, and taxed in those countries using their tax rates.

Therefore what is being proposed is not a uniform rate, rather it is a uniform way of determining profits, and allocating them back to the relevant countries.

To read the KPMG press release, click here.

I must say, I was surprised by the high percentage of respondents in support of the proposal. I suppose, the bigger the company, the more desirable a uniform system could be. A company operating in many countries in the EU could be spared a lot of uncertainty by having just one set of rules to consider. A smaller company, on the other hand, with operations in perhaps one other country, may not be that concerned, particularly if that other country is one with which it has had so many dealings, to the point that it is well acquainted with its rules.

The proposals should reduce, to some extent, the power of national governments to use tax policy to influence matters at home. For instance, a Government may wish to give incentives by allowing certain allowances or deductions in determining profits. To what extent will this power be reduced? We already have State Aid rules to deal with some of these issues, but I suppose this goes one step further.

I have many questions about how the CCCTB will work in practice. The proposals will be published next year, making things a lot clearer then.