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In , the European Commission decided to apply a two-stage approach towards an EU-wide corporate tax system. The first stage, the CCTB proposal, contains common rules with regard to the calculation and determination of the tax base in each member state in the EU.

EU Commission ideas for taxing multinationals almost unworkable

The second stage is to have tax consolidation of the revenues of multinational groups within the EU. The ATAD directive contains certain anti-abuse rules against tax evasion of multinational groups. The ATAD directive contained a statement that requests the Commission to put forward a proposal by October on hybrid mismatches involving third countries. Going forward, it would impose a common set of rules to calculate and determine the taxable profits in all EU member states. If implemented, the tax base of multinational companies will be based on all revenues, including dividend income and capital gains from companies outside the multinational group i.

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The CCTB directive also provides general rules with regard to depreciation and valuation of assets and transactions between related enterprises. In addition, the CCTB directive contains interest deduction limitations, exit taxation, a switch over clause for untaxed foreign income, a general anti-avoidance rule GAAR , rules on tax residency mismatches, and controlled foreign company CFC rules.

Having regard to the above, multinational groups that operate in the EU will be confronted with the same anti-abuse rules in every EU member state, thus limiting tax planning opportunities and making it less attractive to finance operations with borrowed capital. However, the CCTB proposal also contains certain advantages for multinational groups.

A Common Tax Base For Multinational Enterprises In The European Union

The factors that determine this formulary appointment calculation are labor, sales, and assets. In this regard it should be pointed out that intangible assets i. EU member states that rely on a strong services economy, such as Denmark and the Netherlands, oppose the proposed formulary appointment out of fear of losing corporate tax income and a decrease in foreign investment.

Under ATAD II, member states are not allowed to grant a deduction, if a payment gives rise to double deduction or deduction without corresponding taxation. The CCTB directive will enter into force as of 1 January , provided that the member states adopt it.

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However, at present, it is highly uncertain whether the member states will agree on these directives before 1 January The tax consolidation of multinational companies within the EU has been subject to fierce debate among member states. New research commissioned by the Greens in the European Parliament has confirmed that many large corporations pay little tax in EU countries, and that in most countries, the larger the company the lower the tax rate.

Common Consolidated Tax Base

However, these have been blocked by member states. Greens in the European Parliament are using the latest findings of a climate of low tax and tax avoidance by corporations to urge EU governments to stop blocking these reforms and implement them immediately. Such vastly different corporate tax rates between different EU countries allows multinational corporations to game the system and lower their tax bills by shifting their taxable operations to the lowest bidder.

Tax competition costs European taxpayers billions every year, starving them of the revenues needed to fund our public services and infrastructure. By doing so they are colluding in ever-increasing social inequality, and the loss of faith in democratic politics that it causes. The European Commission must come forward with a proposal to introduce minimum effective tax rates across the EU to stop the damaging race to the bottom.

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