The EU Common Consolidated Corporate Tax Base should be supported by all progressives

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In my opinion the ProgTax Blog is an enormously welcome addition to the tax blogosphere. It's producing incisive analysis on key issue and I warmly welcome that.

A new post on the EU's proposals for a Common Consolidated Corporate Tax Base is clear indication of that. There are flaws in the model for the CCCTB that is being proposed, and I do have some reservations about it as a result, but agree wholeheartedly with this extract from that blog which is well worth reading in full:

In our view, it is clear that the CCCTB as proposed would significantly reduce the ability of multinational groups to avoid tax through artificial intra-group transactions either within the EU, as these transactions would be ignored and profits attributed to where real commercial ‘substance’ is, or from outside the EU, as the proposed anti-abuse rules would apply. This is particularly desirable due to the fact that under current EU law, the principle of freedom of establishment within the EU is one of the key facilitators of cross-border tax avoidance by multinationals (as we explained in our post on Vodafone).

Some will argue that implementing a CCCTB will involve a loss of national sovereignty over tax policy. To a certain extent this is true, but given that multinationals can organise their intra-group transactions on a global basis, the only way to effectively tackle cross-border tax avoidance is through cross-border tax administration. It has to be the case that the flip side of the freedom to establish anywhere within the EU is that there is at least some common basis for taxation.

In our view, progressives should support the CCCTB as the most comprehensive way to tackle tax avoidance by EU multinationals.

However, even if desirable it seems pretty clear that the CCCTB will not be implemented (at least in the near future), as a unanimous vote of EU member state government ministers in the Council of the European Union would be required for the Directive to be adopted. While the Commission is proposing for it to be optional (at least initially) for groups to elect into the CCCTB, it is not unreasonable to assume that after a few years of the CCCTB being in place there would be proposals to make it mandatory. We would therefore expect multinationals to lobby the UK and other governments furiously to oppose the measure (even though their tax compliance requirements would be significantly reduced), providing an excuse for the Conservative-led UK government, Irish government and others to ‘defend’ business from ‘EU bureaucrats’ (or as David Cameron might put it, ‘enemies of enterprise‘).

With rejection of the CCCTB a fait accompli, what will be most interesting is the basis on which some EU governments and multinationals oppose the proposals while ignoring current systematic tax avoidance at the expense of ordinary individuals and smaller businesses.

The emphases were in the original. And I agree with both of them. A CCCTB makes complete sense - and is wholly supported by country-by-country reporting. If a government, like that we now have in the UK is opposed to both it has to answer the second question - why is it supporting tax avoidance by big business at cost to individuals and small business?

This is the question UK Uncut ask.

It's a question I have asked in the Tax Gap work.

It's the right question.

At present we're offered no answer by George Osborne.

The deafening silence tells us all we need to know - that this is a policy intended to increase the divisions in society.

And that is why it is wholly unacceptable.

And why the CCCTB is a step in the right direction that is to be welcome and supported by all progressives.

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