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The European Union will today release the latest iteration in its proposals for a Common Consolidated Corporate Tax Base (CCCTB) across Europe. The EU believes the revived plans to unify the tax base will reduce opportunities of perceived multinational tax avoidance, but can and will it ever work?
The concept of CCCTB could appear quite appealing to multinationals, as it simplifies and reduces a company’s cost of cross-border compliance by implementing a single method for calculating taxable profits across the EU and reduces the risk of inconsistent tax laws leading to double (or worse) taxation. But the question arises as to whether nations will be willing to relinquish control over one of their key selling points to business. Nations continue to compete amongst their tax systems, most recently with tax rate reductions offered up by Italy in its budget earlier this month, which makes it hard to imagine a CCCTB state of unity.
This is particularly pertinent with the UK’s imminent removal from the bloc and rumours circulating that the UK could reduce its corporate tax rate to as little as 10% should it not retain access to the single market.
As with a number of plans to increase harmonisation in tax policy, the CCCTB has been fraught with political tensions and difficulties in implementation, with Ireland and the UK strongly opposing the regime. The proposals will demand the support of all 28 countries, or possibly 27 with the UK’s imminent plans to trigger Article 50. However, with the UK’s reduced influence and leverage within the EU following the Brexit vote, Ireland may be left out in the cold, alone and politically isolated in resistance to the proposals.
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Sceptics will eye today’s proposals with the usual eye of disdain, but the removal of the UK’s leverage in these negotiations, may be the approval tipping point.