Study exposes major loopholes in Commission’s corporate tax proposals

A study commissioned by the parliamentary left group in the European Parliament, GUE/NGL, examines the European Commission's proposal of introducing a Common Consolidated Corporate Tax Base (CCCTB) in the EU: ‘Assessing the impact of the C(C)CTB‘

Nov 28th, 2017

The results of the study show that the planned reform would lead to massive shifts of the tax bases of Member States. The European Parliament will vote in February on the Commission's proposal to reshape the corporate tax system. Martin Schirdewan (DIE LINKE.), GUE/NGL's;s shadow rapporteur for the CCCTB, and Fabio De Masi (DIE LINKE.), former Vice-Chair of the European Parliament's Panama Papers' Inquiry Committee (PANA) and now Member of the German Bundestag, comment on the results of the study:

Martin Schirdewan: „EU Member States lose hundreds of billions of Euros every year thanks to the dirty tax tricks of Apple, Google, Nike and Co. The Paradise Papers are just the latest leak that bears witness to this. Implementing a system of unitary taxation within the EU could be a viable tool in putting a halt to the tax dumping of multinationals.”

“The Commission’s proposal, however, falls short of achieving this. Our study shows that allowing corporations to offset their losses across countries without at the same time demanding the apportionment of profits will lead to a massive reduction of the tax base. Furthermore, by limiting the scope of the directive to EU Member States, the Commission incentivises profit shifting outside of the EU. If the CCCTB is to be successful, it has to take into account the global profits of multinationals and has to be combined with an effective minimum tax rate of 25 per cent.“

Fabio De Masi, Member of the German Bundestag, adds: „The system of transfer pricing, which is used to ship profits like Amazon packages across country borders, does not work. Unitary taxation, which calculates profits on the EU level and apportions them to Member States according to economic activity, would in theory be a good thing. The devil, however, is in the detail: The envisaged EU wide loss offsetting will lead to an enormous reduction of the tax base.”

“But only heaven knows if the apportionment of profits will ever happen, as this will require the approval of all EU Member States and without effective minimum tax rates, tax rate competition will only intensify. The ‘Jamaica parties’ (CDU/CSU, Greens, FDP) only agreed on the harmonisation of the tax base – without the apportionment of profits. That is the most harmful option. It would be better to tax all dividends, interests and licence fees flowing out of Germany at the source. This would also increase the pressure on the Netherlands & Co. to stop blocking sensible European solutions.“


The study can be downloaded here.