HomeInsightsEuropean Commission proposes major corporate tax reform for the European Union.

The Commission has announced plans to overhaul the way in which companies are taxed in the Single Market, delivering what it calls, “a growth-friendly and fair corporate tax system”.

Recalibrated as part of a broader package of corporate tax reforms, the Common Consolidated Corporate Tax Base (CCCTB) will make it easier and cheaper to do business in the Single Market, the Commission says, and will act as a powerful tool against tax avoidance.

First tabled in 2011, the CCCTB was designed to strengthen the Single Market for businesses.  While Member States made considerable progress on many core elements of the previous CCCTB proposal, they were unable to reach a final agreement.  Having sought the views of Member States, businesses, civil society and the European Parliament, the Commission is now bolstering the pro-business elements of the previous proposal to help cross-border companies cut costs, red tape and to support innovation.  The re-launched CCCTB will also create a level playing field for multinationals in Europe by closing off avenues used for tax avoidance, the Commission says.

In addition, two further proposals aim to improve the current system for dispute resolution on double taxation in the EU and to bolster existing anti-abuse rules. Taken together, these measures will “create a simple and pro-business tax environment”, the Commission says.

Vice-President Valdis Dombrovskis said: “Tax policy should support the EU’s goals of economic growth and social justice.  Today’s proposals aim to boost growth and investment, support enterprise and ensure fairness.  The current corporate tax system treats debt financing of companies more favourably than equity financing.  Reducing this debt-equity bias in the tax system is an important element of the Capital Markets Union Action Plan and underlines our commitment to deliver on this project”.

Commissioner Pierre Moscovici said: “With the rebooted CCCTB proposal, we’re addressing the concerns of both businesses and citizens in one fell swoop.  The many conversations I’ve had as Taxation Commissioner have made it crystal-clear to me that companies need simpler tax rules within the EU.  At the same time, we need to drive forward our fight against tax avoidance, which is delivering real change.  Finance Ministers should look at this ambitious and timely package with a fresh pair of eyes because it will create a robust tax system fit for the 21st century”.

The Commission says that to encourage swift progress, the CCCTB has been broken down into a more manageable, two-step process.  The common base can be quickly agreed to unlock key benefits for both businesses and Member States.  Consolidation should be introduced soon afterwards and would allow all the benefits of the complete system to be reaped.  To read the Commission’s press release in full, click here.