CCCTB System Against Profit Tax Manipulation

Tax policy has long been one of the most interesting areas for the Commission, so it is not surprising that the latest proposal to change corporate tax policy in the European Union has emerged. In order to create a fairer system that would encourage growth, the Commission has decided to revise the system of corporate income tax based on the Consolidated Corporate Tax Base (CCCTB), noting that the rates of corporate income tax remain under the jurisdiction of the member states. Thus, for the first time under the presented proposals, uniform rules for calculating corporate income tax will be established, the dispute resolution system for double taxation will be improved, and inconsistencies with non-EU countries will be eliminated.

Many Improvements

The new CCCTB system ‘will be mandatory for large groups of multinational companies whose opportunities for aggressive tax planning are the greatest, ensuring that the profits of companies with global revenues exceeding 750 million euros per year are taxed where they are generated, filling gaps in the law related to profit shifting for tax purposes, encouraging companies to finance themselves more through equity and market expansion rather than debt, and supporting innovation by providing tax incentives for research and development related to actual economic activity.’

In addition, the CCCTB will strengthen the single market for businesses, contribute to combating tax evasion, and support growth, investment, and job creation in the EU. Regarding the improvement of dispute resolution, the Commission proposes ‘adapting existing dispute resolution mechanisms to accommodate businesses,’ meaning that ‘more cases will be covered, and member states will need to agree on a binding solution to double taxation issues within clear deadlines.’

Simpler Rules

The new measures will prevent companies from avoiding taxation by exploiting gaps in the law due to inconsistencies between the tax systems of member and non-member states (hybrid mismatches).

– With the new proposal for the consolidated corporate tax base, we are responding to the concerns of both businesses and citizens. I have discussed this topic several times with the Commissioner for Taxation, and it has become clear that companies need simpler tax rules in the EU. At the same time, we need to combat tax avoidance, which brings real change. Finance ministers should openly consider this ambitious and timely package as it will create a solid tax system suitable for the 21st century,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation, and Customs.