EU to Propose Single System for Computing Tax

The proposed common corporate tax base for companies operating in the European Union is intended to reduce tax avoidance.
Matthew HellerMay 28, 2015
EU to Propose Single System for Computing Tax

The European Commission is planning to crack down on international tax avoidance by proposing that companies operating in the European Union follow a single set of rules to calculate taxable profits.

The EU’s executive arm is set to detail proposed tax measures on June 17 but according to Reuters, Commission Vice President Valdis Dombrovskis on Wednesday gave reporters a preview of its plans, saying it would propose that a common corporate tax base (CCTB) be introduced on a staged basis.

“We agreed on the need to combat tax avoidance by re-establishing the link between taxation and where the company actually does business,” Dombrovskis said after a meeting of commissioners.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Under that proposal, companies would have to comply with just one EU system for computing tax liabilities, rather than different rules in each member state, and would only have to file a single tax return for all their EU activity.

“The current rules for corporate taxation no longer fit the modern context,” said a discussion document that was prepared for the Commission. “Corporate income is taxed at a national level, but the economic environment has become more globalized, mobile, and digital.”

A similar proposal failed to gain sufficient support from member states in 2011, but Newstalk reports that “increased awareness of multinational tax avoidance through a series of high-profile leaks and investigations make[s] the common tax base much more likely this time around.”

Dombrovskis acknowledged that member states would need to agree on how to distribute tax revenues, something they have failed to do to date. Any CCTB system, he said, would have to be compulsory, but “It has to be an ambitious and also a realistic approach, realistic in the sense that it needs unanimous approval in the Council.”

In March, the Commission announced new disclosure rules requiring countries to share information about tax rulings with other member states, and the EU’s top commissioners have vowed to move the EU toward greater tax harmonization.