CCCTB - What to expect / what can we do

seamus

Surprised no-one started a thread on this (I checked the other forums!)

With the unveiling of this Common Consolidated Corporate Tax Base proposal later on today, what can we expect it to contain?

Media yesterday suggested that any international corporate would pay all of their corporate tax in the country that they made the most sales in, but this seems unlikely to me - UK, France and Germany would take everything and leave nothing else for anyone.

Is it more likely that the plan is to have companies register as EU-based, then file a single tax return based on a single EU-wide rate and the tax is divided out among EU countries based on sales or presence? So if Google makes 80% of it's sales in Germany and 20% in Ireland, then 80% of Google CT payment goes to Germany?
Or is it to even ignore the rate and simply apply the rate of the country where the company made the bulk of its sales (e.g. Germany in the above example)?

Obviously any proposal is a non-runner for us as we rely on FDI, no so much for tax income, more for employment and the knock-on benefits that brings. If a corporate finds that they're paying all of their CT at the German rate because most of their sales are in Germany, then they might find it cheaper to up roots and move to Germany.

I'm presuming that this is still one of the exclusive competence areas that we can veto? Though we wouldn't be the only country who dislike such a proposal.
I also assume that the rest of the EU can't go off and do this off their own bat - i.e. start charging Google corporate tax under this EU-wide regime, even though they've already paid their CT here?

ei.sdraob

Department of Finance wrote:

“Our position on the CCCTB is well known. We do not favour it for reasons
of principle and practicality. The proposal cuts across national sovereignty
and subsidiarity.

RTE also mentioned that Dept of Finance think it will make things more confusing and make it harder to budget, as per their report (which i am trying to find)


PricewaterhouseCoopers have a report here

seamus

Interesting. Looking at the PWC report, it doesn't seem like that bad a deal for us.

If it's a 1/3 basis in terms of Payroll/Sales/Assets, then to take the Google example again it could encourage them to uproot from other EU countries and locate all of their offices in the one country with the best CT rate. That means that we then take at least 66% of their CT and solidify their presence in Ireland. If they don't have offices in other countries, it makes it more difficult for them to leave.

I do agree with the DoF though that if it resembles what PwC have outlined, then it does make everything a whole lot more complicated. Companies might just say to hell with it and base themselves outside the EU.

Obviously the other risk with us agreeing to any such proposal is that we could be handing over our veto card and the nature of the tax base could possibly be modified without requiring EU members to vote on it.

Scofflaw

The Commission finally rolls out its CCCTB proposal today:

The European Commission has today proposed a common system for calculating the tax base of businesses operating in the EU. The aim of this proposal is to significantly reduce the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face in having to comply with up to 27 different national systems for determining their taxable profits. The proposed Common Consolidated Corporate Tax Base (CCCTB), would mean that companies would benefit from a "one-stop-shop" system for filing their tax returns and would be able to consolidate all the profits and losses they incur across the EU. Member States would maintain their full sovereign right to set their own corporate tax rate. The Commission estimates that, every year, the CCCTB will save businesses across the EU €700 million in reduced compliance costs, and €1.3 billion through consolidation. In addition, businesses looking to expand cross-border will benefit from up to €1 billion in savings. The CCCTB will also make the EU a much more attractive market for foreign investors.

Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-Fraud and Audit said: "The CCCTB will make it easier, cheaper and more convenient to do business in the EU. It will also open doors for SMEs looking to grow beyond their domestic market. Today's proposal is good for business and good for the EU's global competitiveness."

When it comes to corporate taxation, there are still serious obstacles to the Single Market which are holding businesses back. Cross-border companies have to deal with up to 27 different rulebooks for calculating their tax base and must work with up to 27 different tax administrations. In addition, they are faced with an extremely complex system for determining how intra-group transactions should be taxed (transfer pricing), and cannot offset their losses in one Member State against profits in another. The result is that larger businesses are faced with huge costs and complexities, while smaller businesses are often completely deterred from expanding within the EU.

The CCCTB aims to overcome these problems by offering companies one single set of corporate tax base rules to follow and the possibility of filing a single, consolidated tax return with one administration for their entire activity within the EU. On the basis of this single tax return, the company's tax base would then be shared out amongst the Member States in which it is active, according to a specific formula. This formula will take into account three factors: assets, labour and sales. After the tax base has been apportioned, Member States will be allowed to tax their share of it at their own corporate tax rate. Under the CCCTB, Member States will continue to set their corporate tax rate at the level they see fit, as is their national prerogative.

The CCCTB would be optional for companies. This means that those that felt that they would benefit from a harmonised EU system could opt-in, while other companies could continue to work within their national systems.

Bloomberg article here: http://www.bloomberg.com/news/2011-03-16/eu-renews-push-for-common-company-tax-base-challenging-ireland.html

If you're not sure what a tax base is, as opposed to a tax rate, please ask before starting in on Ireland's tax rate.

cordially,
Scofflaw

Scofflaw

seamus wrote: »

Interesting. Looking at the PWC report, it doesn't seem like that bad a deal for us.

If it's a 1/3 basis in terms of Payroll/Sales/Assets, then to take the Google example again it could encourage them to uproot from other EU countries and locate all of their offices in the one country with the best CT rate. That means that we then take at least 66% of their CT and solidify their presence in Ireland. If they don't have offices in other countries, it makes it more difficult for them to leave.

I do agree with the DoF though that if it resembles what PwC have outlined, then it does make everything a whole lot more complicated. Companies might just say to hell with it and base themselves outside the EU.

Given it's optional, that seems unlikely.

seamus wrote: »

Obviously the other risk with us agreeing to any such proposal is that we could be handing over our veto card and the nature of the tax base could possibly be modified without requiring EU members to vote on it.

Actually, one of the Irish government's 'objections' to CCCTB is that any change requires unanimity. Might repost a discussion of their objections.

cordially,
Scofflaw

seamus

Scofflaw wrote: »

Given it's optional, that seems unlikely.

Indeed. Companies will just pick whichever option works out cheaper for them and go for that.

Is there any argument to say that is in fact potentially more costly for companies, as they prepare a consolidated return in addition to the separate ones in order to decide which filing works out more cost effective?

I haven't read any other articles on it, so maybe I'm missing some kind of "opt-in once" rule that doesn't allow companies to choose year-to-year.

sink

Will this proposal stop companies locating their head offices here for the purpose of using us as a tax haven?

Dannyboy83

Scofflaw wrote: »

If you're not sure what a tax base is, as opposed to a tax rate, please ask before starting in on Ireland's tax rate.

It's optional.
The day is saved (I assume)

Could you explain to me - What effect does this have on "distance selling regulations", if any?

Scofflaw

seamus wrote: »

Indeed. Companies will just pick whichever option works out cheaper for them and go for that.

Is there any argument to say that is in fact potentially more costly for companies, as they prepare a consolidated return in addition to the separate ones in order to decide which filing works out more cost effective?

I haven't read any other articles on it, so maybe I'm missing some kind of "opt-in once" rule that doesn't allow companies to choose year-to-year.

From the FAQ:

Companies would have to opt-in to the CCCTB for a minimum of five years (to avoid them opting in and out for tax planning purposes). In addition, an annex to the proposal lists various criteria that a company must meet to be eligible for the CCCTB system (e.g. type of corporate tax rules that it must be currently covered by; type of company …).

However, I note that the actual proposal doesn't seem to set a minimum period.

cordially,
Scofflaw

kmick

"...this proposal is to significantly reduce the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face.."

The statement above makes me want to laugh and cry at the same time.

As an aside Ireland is currently ranked no 1 in the OECD for ease of paying taxes. 6th on this report but 7th now I think in the world.
http://www.tomasznowak.com/html/tnc____the_ease_of_paying_taxe.html

Scofflaw

sink wrote: »

Will this proposal stop companies locating their head offices here for the purpose of using us as a tax haven?

No - because they don't have to opt for CCCTB.

Dannyboy83 wrote:

It's optional.
The day is saved (I assume)

Could you explain to me - What effect does this have on "distance selling regulations", if any?

None at all, as far as I can see - are you thinking of "transfer pricing"?

cordially,
Scofflaw

Scofflaw

kmick wrote: »

"...this proposal is to significantly reduce the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face.."

The statement above makes me want to laugh and cry at the same time.

OK - why?

intrigued,
Scofflaw

kmick

Scofflaw wrote: »

OK - why?

intrigued,
Scofflaw

Beacuse the system is optional the two systems will have to exist in parallel - I dont think I have to go deeper than that?

Scofflaw

kmick wrote: »

Beacuse the system is optional the two systems will have to exist in parallel - I dont think I have to go deeper than that?

No, that's a fair point - on the other hand, one company doesn't have to run the systems in parallel unless it intends swapping in and out. It's something that would have to be factored into any costing of opting for it - and something that shouldn't be allowed to become a one-way gate into the system.

I don't know whether CCCTB will actually work. If the Irish government (and IBEC) is right, then it's going to collapse under its own internal contradictions - but I don't really think that much of the Irish government's powers of economic analysis right now.

cordially,
Scofflaw

ei.sdraob

The critical analysis is coming from the Dept. Of Finance, not the government.