Common consolidated corporate tax base

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Common consolidated corporate tax base
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The concept of Common Consolidated Corporate Tax Base is one of the solutions, proposed by the European Commission, for harmonizing direct tax system in the member countries. CCCTB refers mainly to CIT * Corporate Income Tax.

The basis of CCCTB is harmonizing national tax law in a way, that the tax base (for the purposes of CIT) will be calculated on the same conditions in every member country. That would increase transparency of national tax systems and the comparability between countries' tax systems. Once the method of calculating the tax base is harmonized, we have to apply it to the companies, that conduct their business in more than one member country or to whole European capital groups. Now, according to harmonized principles, the tax base is calculated in every member country. The next step is to sum up calculated tax bases. The most important stage of the whole CCCTB idea is to divide the aggregated tax base to particular member countries, according to a specific key. The key has to be agreed between member countries firstly. Once the aggregated tax base is divided between member states, they will apply national CIT rates to the partial tax rates, they were given according to the key.

The biggest challenge for the European Commission

The key that would be used for dividing aggregated tax base to member countries is the most difficult part of introducing CCCTB. The key would determine how big the budget incomes of particular member states will be. After introducing the key there would be less possibilities of attracting foreign direct investments by member countries. Thus, every member country is going to fight for the most beneficial way of setting the key. As we can see reaching the consensus will be difficult.

That is why many politicians and economists see introducing the concept only up to determining the same principles of calculating the tax base as sufficient. It would still reduce costs of compliance to some extent and would not be so controversial.

Advantages and disadvantages of CCCTB

The main advantages of CCCTB are:

  • harmonizing national tax rules according to estimating the tax base,
  • increasing tax systems transparency,
  • increasing tax systems comparability,
  • reducing compliance costs connected with staying in line with various tax base estimating rules,
  • eliminating the need for transfer pricing regulations,
  • eliminating double-taxation,
  • the possibility of calculating aggregated loss (by summing up all national tax bases).

The main disadvantages are taking away from member countries tools of fiscal policy and reducing tax competitiveness of countries representing the lowest CIT rates.


Author: Maciej Sawicki