The CCCTB makes progress

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Interesting that the day following the first meeting of the committee considering the future of corporation tax in the UK the FT publishes and article on the CCCTB (European Common Consolidated Corporate Tax Base).

Also interesting that this is written in part in the context of Ireland, who has lead the fight against the CCCTB for reasons that are only too obvious: the CCCTB would mean that it would be very much harder to artificially relocate profits there.

As the FT notes:

The Treasury has also been urged by unions to consider supporting the CCCTB. A report published this year by the TUC said: “One way in which the UK could now evidence this willingness to tackle the harmful effects of tax competition would be to commit [itself] to the creation of what is called the common consolidated corporate tax base for Europe.”

But the Treasury says its opposition is based on a principled objection. It said: “Like a number of other EU member states the UK is deeply sceptical of the case for a common consolidated corporate tax base. In an increasingly globalised world, countries need the flexibility to respond to shocks, and stimulate investment, employment and economic growth in different ways. Adopting a single set of rules for calculating the tax base within the EU would restrict flexibility and be counterproductive to achieving these goals.”

I admit, I wrote the first comment. And I think the Treasury just wrong. They cannot win on both tax rate and tax base at the same time in the fight against tax competition. Stimulus should come from two things: real economic value paid for from tax, such as well educated people, and subsidy when needed. Because corporation tax covers so many diverse entities of such enormous range in size it is, on balance, the wrong instrument for this job.

A common base would leave competition on rates. I can live with that. It’s open, fair and honest. The CCCTB cuts out the rest, in Europe for now, and would prove massively useful in countering tax competition elsewhere as well.

It’s only time before the Treasury goes for it, I believe.