Please hold the line, the CCCTB will be with you shortly

The 2787th Economic and Financial Affairs (ECOFIN) Council meeting adopted a key issues paper to be submitted to the European Council on 8 and 9 March 2007, which outlines the main policy objectives relating to economy and finance. This meeting will probably stay in the annals of history not because of its round number (a think it is time they stop counting these meetings) or because what was said or discussed in terms of tax issues. The novelty is perhaps what is actually missing from the Key Issues Paper (KIP) prepared by the German Presidency, namely any reference to the ongoing project on a European-wide Common Consolidated Corporate Tax Base (CCCTB).

The draft KIP (which actually means chicken in my adopted Dutch language) originally included a heading on “tax policy in Europe – further development in the field of direct taxation”. There the actual CCTB project was apparently reaffirmed as a priority of the EU to further enhance the harmonization of direct taxation in Europe. Probably as a direct result of pressures from member states that do not favor the CCTB project (e.g. Latvia. Ireland, UK), the reference of CCTB as a key policy objective was (apparently) excluded from the final paper. An enigmatic point 3.3., under the heading “Tax policies in Europe – enhancing the internal market”, now addresses the tax issues:

National rules on taxation differ between Member States. The functioning of the internal market may be improved through co-operation on taxation among Member States and where appropriate at the European level, while respecting national competencies. The Council (Economic and Financial) has been informed of the ongoing work especially in the field of taxation and of action taken to tackle fiscal fraud and harmful tax practices.

It should be noted that the Commission's goal on the CCTB is to present a full community legislative proposal to the ECOFIN and to the European Parliament by the end of 2008. It is also public the resistance of some member states to any type of legislative proposal and the (open) possibility of the CCTB to proceed its path under the controversial enhanced cooperation procedure, which generally only requires eight member states. What is now uncertain is the consequences of an eventual setback at the level of the EU Council of the (German or Presidency) ideas to prioritize the CCTB project under the Lisbon agenda.

I have to admit that it has been difficult for various reasons to follow this project from the outset. A mixture of possibility that the project derails (as some other EU projects) and also too much information available (and no incentive to read) has made me avoid entering fully into this subject from a technical perspective. And it easy to understand why!

The CCCTB project, which the Commission officially launched in the autumn of 2004, has covered various technical meetings involving experts from all twenty seven Member States. The discussions have addressed several highly technical structural elements of the tax base, such as assets and tax depreciation, reserves, provisions and other additional elements such as group taxation, territorial scope or international aspects. Amongst the several meetings described in the EU Commision website, the following working documents have been discussed:

Working Document The mechanism for sharing the CCCTB
Working Document Related parties in the CCCTB
Working Document Issues related to business reorganisations
Working Document Personal Scope of the CCCTB
Working Document Dividends
Working Document Issues related to Group taxation
Working Document Administrative and Legal Framework
Working Document Tax treatment of Financial Institutions
Working Document Territorial Scope
Working Document International aspects in the CCCTB
Working Document Financial assets
Working Document Taxable income
Working Document Tax balance sheet
Working Document Capital Gains and Losses
Working Document Intangible Assets
Working Document Liabilities, Reserves and Provisions
Working Document General Tax Principles
Working Document Assets and Tax Depreciation

In addition to the numerous EU working documents, written contributions have been also received from third parties, with a particular reference to the very active BusinessEurope (formerly UNICE). Knowing that some member states have limited resources, I am not surprised that this project is giving some headaches to some tax officials.

In the end, even though the success of the most ambitious proposal of the Commission in the field of corporate taxation seems uncertain, I will continue to pay (as much as possible) attention to the CCTB project. Just in case…

PS: Perhaps some of you recognized, but what better than M. C. Escher to portray the dimensions and confusions of being a European?