In October, the Commission continued its drive to reform EU tax policy by publishing a legislative proposal for a common consolidated corporate tax base (“CCCTB”). The initiative aims at harmonizing EU rules for the calculation of taxable corporate profits in order to simplify corporate tax codes and limit tax avoidance practices.
The high-profile proposal was relaunched on 25 October 2016 after a similar piece of legislation from 2011 was vetoed by several EU member states in the Council. In order to prevent the replay of such a scenario, the Commission decided to adopt a different approach with the new CCCTB proposal. This new approach foresees breaking the proposal down into two separate legislative acts - a directive on a common corporate tax base will first be agreed by the Council, after which the member states should focus on the second directive on the consolidation element of the CCCTB. Other changes include the compulsory use of the CCCTB by large multinationals with a turnover above €750 million, an allowance for equity issuance aimed at tackling the debt-equity tax bias and deductions for R&D expenditure.
Although the political environment, dominated by tax avoidance/evasion scandals, appears to be more conducive to the adoption of the proposal than in previous years, difficult negotiations in the Council are to be expected. Since the CCCTB proposal is anchored in the policy area of taxation, EU member states will have to agree on it unanimously. The European Parliament, a strong proponent of tax reform in the EU institutional framework, will only play a consultative role.