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EU’s Common Consolidated Corporate Tax Base (CCCTB) - Peter Vale commentary

Peter Vale Peter Vale

Today’s announcement from the European Commission is a further attempt to push through the EU’s Common Consolidated Corporate Tax Base (CCCTB) rules. These rules would have a significant impact on a small economy such as Ireland as they would see a major reallocation of taxable profit and erode the benefit of our low 12.5% tax rate. 

A year ago, we would have considered the likelihood of the CCCTB proposals reaching implementation stage as remote. This likelihood has now probably reached “low” level and isn’t helped by the future departure from the EU of one of its biggest opponents, the UK.

The CCCTB is essentially a two part exercise. The “Common” piece seeks to ensure that all EU States calculate their taxable profits in a similar manner. The second part is “Consolidation”, which means that the profits of the enterprise are then allocated across relevant EU Member States using a prescribed formula. 

Of most concern to Ireland is the consolidated piece of the proposals, as the formula places emphasis on employee numbers, sales and assets. This will likely see a relatively small amount of the enterprise’s profits allocated to a small economy such as Ireland, thus significantly eroding the benefit of our low tax rate.

A common base is of less concern but would be seen by many as a stepping stone to consolidation. 

The general view in Ireland is that many of the issues that CCCTB seeks to address are being dealt with through the BEPS process and at a minimum CCCTB should be set aside until the outcome of BEPS is clearer. This is not a path favoured by the Commission at present.

Ireland is not the only country with serious reservations about the CCCTB proposals as currently drafted. However there is considerable support for the proposals amongst larger economies in particular. Bear in mind however that the proposals require unanimous support to be passed. At the moment it’s a case of watch this space.