Tom Neale, head of unit, Company Taxation Initiatives at the Commission’s Taxation and Customs Union Directorate General, said a lot of unresolved double taxation issues still remained at EU level. The consultation sought factual examples.
Neale expects a debate to follow the report on how to eliminate double taxation and the need for action at the EU level. He also announced a possible Communication in the first quarter of next year.
“The rest of the year we’ll be doing an impact assessment looking at possible ways of dealing with the problem,” Neale said.
Many feel that a common consolidated corporate tax base (CCCTB) will be another weapon against double taxation. Work on the measure, which is one of the Commission’s most important tax projects, was revived by Algirdas Semeta, when he became commissioner for taxation, customs, audit and anti-fraud at the beginning of this year and was given more prominence by the Monti report a few months later,
“Under a CCCTB, companies should be able to consolidate profits and losses across the EU,” Neale said. “We were close to making a proposal in 2008-2009, but it was put on ice until the new commissioner said he wanted it looked at again.”
Neale says he is optimistic about making progress with the CCCTB, though the issue is controversial issue and it will be difficult to secure the backing of all EU member states, .
One of the benefits Neale sees in a CCCTB is its ability to resolve problems of double taxation arising from differences in the market value of assets transferred between member states.
Under a CCCTB, gains would be taxed when made and the proceeds would form part of the consolidated tax base. There would be no valuation of assets when a company enters or exits a group.
“I don’t think a company would opt into the CCCTB if they have to value all their assets,” Neale said. “Within a common tax base, you can move assets around. At the end of the tax year, profits will be consolidated and shared out according to a formula.”
Guy Kersch, senior consultant to Charles River Associates, went further.
“Even transfer pricing will go away under a CCCTB,” Kersch said.
Neale expects a draft proposal for a directive on the CCCTB to be submitted to the European Commission in the first quarter of 2011 and he hopes the commissioners will agree on it by March 30.
Neale also expects a report on a public consultation looking at recasting and amending the Interest & Royalties Directive based on almost 70 responses received from a public consultation that ended last month.
The Commission will propose the lowering of the necessary shareholding levels to bring them in line with the parent-subsidiary directive, making more companies eligible.
“However we won’t propose it should apply to all companies,” Neale said. “That would be too expensive and impractical for member states.”
Neale hopes the report will be released by March next year, though he admits it may slip to April.
