The EU and consolidated taxes

IT’S easy to see where the debate over the EU’s corporate tax reform will focus. In fact, Taxand have already put out their view that the move to a common consolidated corporate tax base is harmonisation by ‘stealth’ and a backdoor method of undermining low tax rate regimes.

In case you didn’t know, the CCCTB means multi nationals would use a single set of rules for calculating their taxable profits instead of using the rules in each EU member state. Once done the EU then shares out the profits to the states in which a company trades. The share-out takes place according to an EU formula and the profits are then taxed at local rates. You can see why Euro sceptics would be bristling.

The EU sharing out the profits according to its formula has the feel of someone taking over the role of sovereign states. But Brussels makes a good point. Multinationals hypothetically trading in all EU member states would have to calculate taxable profits according to 27 sets of rules. Enormously expensive compared to using a single set of rules.

But I make a prediction. There’s every possibility that the debate over this issue will not remain focused on the benefits or costs to business. It will inexorably shift to politics and who controls what, and whether this is really about undermining EU member states that charge particularly low corporate tax rates, ie. Ireland. Taxand already believe that and it’s no stretch to see others concluding likewise.