Commission's Action Plan on corporate taxation

The EU Commission has released its Action Plan to reform corporate taxation in the EU. The Commission’s Action Plan sets out a number of initiatives to tackle avoidance and strengthen the single market in a way which the Commission argues will significantly improve the corporate tax environment in the EU.

In March 2015, the Commission launched a Tax Transparency Package to create more openness and cooperation between Member States on corporate tax issues. A key element in the Package was a proposal for the automatic exchange of information on tax rulings. This proposal received unanimous political support from Finance Ministers at the Informal ECOFIN in April. Member States are now discussing it at technical level with the aim of reaching agreement by the end of the year.

The Action Plan to reform corporate taxation represents the second and more comprehensive step towards reforming corporate taxation in the EU. The key actions included in the Action Plan include a relaunch of the Common Consolidated Corporate Tax Base (CCCTB) initiative. The Commission has also published a first pan-EU list of third country non-cooperative tax jurisdictions and launched a public consultation on whether companies should have to publicly disclose certain tax information.

Re-launching the CCCTB

The Commission will re-launch its proposal for a CCCTB in 2016. Negotiations are currently stalled on the Commission's 2011 proposal for a CCCTB. However, the Commission claims that there is a general consensus that they need to be revived, given the major benefits that the CCCTB offers. Work will begin immediately on a new proposal to introduce a mandatory CCCTB for MNEs. The Commission proposes a “step by step” approach to introducing a CCCTB, with consolidation introduced as a second step, as this has been the most difficult element in negotiations so far. The Commission will present this new proposal as early as possible in 2016.

Given the opposition of a number of Member States to the CCCTB, including the UK, it seems most likely that any proposal would ultimately only be able to proceed under the enhanced cooperation procedure.

Ensuring effective taxation

The Action Plan sets out the objective that companies should pay a fair share of tax in the country where they make their profits, without harmonising corporate tax rates across the EU. For example, the Commission is proposing measures to close legislative loopholes, improve the transfer pricing system and implement stricter rules for preferential tax regimes, among other things.

Of course, many of these measures are aligned with the OECD’s BEPS project, which the Commission strongly supports. However, the Commission sees its role as ensuring that BEPS reforms are introduced in a consistent way across the EU, taking into account issues such as the fundamental freedoms.

Increasing transparency

Building on the measures already announced in the March 2015 Tax Transparency Package, the Action Plan sets out the next steps for greater tax transparency - within the EU and vis-à-vis third countries. To launch a more uniform EU approach to non-cooperative tax jurisdictions, the Commission has published a pan-EU list of third countries and territories blacklisted by Member States to be updated regularly. This is intended to be used to screen non-cooperative tax jurisdictions and develop a common EU strategy to deal with them.

The Commission is also launching a public consultation to gather feedback on whether companies should have to publicly disclose certain tax information, including through Country-by-Country Reporting (CbCR).

Tax environment for business

The Action Plan sets out the aim that tax obstacles should be removed to make it simpler and more attractive for businesses to operate cross-border within the EU. Of particular note are proposals to introduce temporary cross border loss relief and proposed improvements to the current mechanisms to resolve double tax disputes to be introduced by summer 2016.

Co-ordination

The Commission will propose reforms to the Code of Conduct Group to aid its efforts to counter harmful tax competition. The Commission will propose that its mandate should be extended and in particular should also cover harmful tax competition in non-EU countries as part of the wider approach to “non-cooperative jurisdictions”.

The Commission has released more information on the various measures in Q&A format at:

Q&A on Action Plan

Q&A on CCCTB Re-launch

Update

For the EU Commission’s latest corporate tax package, including plans for a CCCTB, see “EU Commission’s corporate tax package”.