EU proposes ‘business-friendly’ unified tax rulebook for companies
The European Commission has proposed new corporation tax rules in Europe that could allow companies to file one tax return for all its operations in the EU.
The EU’s “Business in Europe: Framework for Income Taxation” (BEFIT) will be a single rulebook for companies trading in Europe.
It will replace an earlier Commission proposal called the Common Consolidated Corporate Tax Base (CCCTB).
The Commission has also proposed that companies will be able to write off losses incurred this year and last year against profits made pre-pandemic.
The plan was presented this afternoon by the Commission’s Executive Vice President Valdis Dombrovskis and Economy Commissioner Paolo Gentiloni.
Some of these proposals will be further developed over the next two years to reflect broader international tax reforms.
Discussions are continuing under the supervision of the OECD on a global agreement on corporate tax rules.
The Biden administration in the US has signalled its agreement with the broad outlines of the OECD plan.
Commission Executive Vice-President Valdis Dombrovskis said a global solution is still the best way to achieve agreement on corporate tax reform.
Commissioner Gentiloni said the impetus for reform comes from the situation post-pandemic and the need for states to have strong resources and the need to redesign taxation systems which are “pre-globalisation” and “pre-digitalisation”.
The Commission has made several new proposals on company taxation today in a document entitled “Business Taxation in the 21st Century”.
The Commission’s proposals include a crackdown on so-called shell companies that are created to facilitate tax avoidance by certain multinationals.
It also includes a carbon border tax and a financial transaction tax – both of which have already been proposed.
The plan also includes a levy on digital companies which would “coexist with the implementation of an OECD agreement.”
This would contribute to repayments of the funds raised under the ‘NextGenerationEU’ investment plan.
The Commission has also proposed that the effective corporate tax rate of “certain large companies” with operations in the EU would be published every year.
This would be linked to the proposal being discussed at OECD level for a minimum level of corporate tax.
In a statement, the Department of Finance said Ireland is “focused on achieving a global agreement this year at the OECD on reframing international tax rules. This is the priority for Ireland.”
An EU official, involved in tax reform, who spoke on condition of anonymity, said “ee need unanimity but we’re going to fight for it and convince everybody that it will be good for EU citizens and it’s going to be fairer and more effective and good for jobs.”
Valdis Dombrovskis said today that taxation needs to keep up to speed with evolving economies and priorities.
“Our tax rules should support an inclusive recovery, be transparent and close the door on tax avoidance. They should also be efficient for businesses big and small,” he said.
“Today’s communication will set the foundations for a corporate tax system in Europe that is fit for the 21st century, helping us to build a fairer and more sustainable society,” he added.
Paolo Gentiloni, Commissioner for Economy, said it is time to rethink taxation in Europe.
“As our economies transition to a new growth model supported by NextGenerationEU, so too must our tax systems adapt to the priorities of the 21st century,” he said.
“The renewal of the transatlantic relationship offers an opportunity to make decisive progress towards a global tax reform. We must work to seize that opportunity, while ensuring that an international agreement protects Europe’s key interests,” he stated.
“Today we set out how a global deal will be implemented in the EU – and the other steps we will take over the coming three years to increase tax transparency and help businesses small and large to recover, grow and invest,” he added.