If at first you don’t sucCCCTB…

How similar are Chris Evans (newly announced presenter of BBC Top Gear) and David Gauke (UK Financial Secretary to the Treasury)? I know, a question we have asked all too often.

Later today the European Commission will provide more detail on a revival of the Common Consolidated Corporate Tax Base, or CCCTB.

Mention CCCTB to any tax professional who has been around for a while and you will get a similar response. Cue rolling of eyes and a little chuckle.  We’ve been here before. Or so we think.

 Some talk about CCCTB having been on the table 5 years ago. Well, we can go a lot further back than that.

CCCTB first hit the table in Brussels back in October 2001, as a proposal intended for the benefit of businesses, to reduce the compliance burden of dealing with multiple different tax regimes. Indeed, a key feature of the CCCTB was that it was optional for businesses.

Wind forward to 2004, and the Commission was working on real CCCTB proposals. This project ran until 2011, but the key period was probably late 2007. At this point the Commission published a “technical outline”, “sharing mechanism” and “admin framework”. In effect, the detailed analysis of how CCCTB would work.

The 2007 proposals

• A single system to calculate the consolidated taxable profits of group companies across their entire EU activities.
• The same calculation irrespective of where in the EU the group was based.
• The total EU taxable profits then allocated to EU member states in which the group has activities, by reference to a formula.
• Each EU member state then taxes their allocation of profits at their domestic tax rate.
• Companies have reduced administrative burden, and only have to agree the total taxable profits with one tax authority.
• Intra-EU transfer pricing would no longer exist.

As late as March 2011, then Commissioner Šemeta was promoting the cause.

Despite much effort, including taking a route whereby only a limited number of EU Member States would have to adopt CCCTB at inception, the project floundered. It faced a combination of huge complexity in aligning different tax regimes, and the political challenges of giving up control over the tax base.

The 2015 proposals

And so we roll forward again to 2015, and his successor Commissioner Moscovici is back on the trail of CCCTB.

The Commission Action Plan published earlier this year included a relaunch of the CCCTB as a “key building block” in the agenda for “fairness, transparency and a truly single fiscal market”.

But what is expected to be announced today with have 2 key differences from the old CCCTB.

Firstly, the objective has shifted a little. It is now firmly within the “tackling tax avoidance” agenda, and so the old voluntary element will be gone. The new CCCTB will be mandatory, meaning that adopting countries will, in effect, surrender their domestic tax base in exchange for an EU one.

The second difference is intended to be a temporary one. A stepping-stone to full CCCTB, by omitting a “C”; the second “C” which stands for “consolidated”. Without that, you end up with a simple alignment of the tax base calculations of adopting states, without the challenges of performing that calculation on EU wide activities, and the fights over how you split those taxable profits.

So what does this mean for the possible success of CCCTB, or CCTB as it will start out?

Well, the stepping-stone certainly gives it more scope to succeed. One of the main stumbling blocks in the past was the concern from Member States as to how the allocation would work. However, any alignment of tax base calculations will have winners and losers. Although countries will remain free to set their tax rate, it will be a very hard sell. It would take away the ability of sovereign governments to introduce tax incentives in their own countries.

Indeed, David Gauke, UK Financial Secretary to the Treasury has already described Moscovici’s CCCTB proposals as “a proposal still looking for a justification”, and has said that “we do not see it applying to the United Kingdom”.

Back in March, Chris Evans made possibly the most unequivocal denial of interest in the Top Gear job on Twitter, saying “Top Gear debate. I can categorically say I am not and will NEVER be running for office. Pls discount my candidacy.”

So the question remains as to how much political will there is to see multilateral solutions to the tax agenda, at the price of domestic control. The UK has been particularly unilateral to date. But Mr Gauke’s denial is much less vehement than that of Mr Evans, so perhaps we wait and see…

What is certain though is that if CCCTB, or even CCTB is to get off the ground, there is going to have to be unprecedented collaboration and cooperation between member states on tax.