(1)

Companies which seek to do business across frontiers within the Union encounter serious obstacles and market distortions owing to the existence of 27 diverse corporate tax systems. These obstacles and distortions impede the proper functioning of the internal market. They create disincentives for investment in the Union and run counter to the priorities set in the Communication adopted by the Commission on 3 March 2010 entitled Europe 2020 – A strategy for smart, sustainable and inclusive growth . They also conflict with the requirements of a highly competitive social market economy.

(1)

Companies which seek to do business across frontiers within the Union encounter serious obstacles and market distortions owing to the existence of 27 diverse corporate tax systems. These obstacles and distortions impede the proper functioning of the internal market. They create disincentives for investment in the Union and run counter to the priorities set in the Communication adopted by the Commission on 3 March 2010 entitled Europe 2020 – A strategy for smart, sustainable and inclusive growth , to the Euro Plus Pact and to the economic, budgetary and fiscal integration needed in order to establish a highly competitive social market economy.

(1a)

More cooperation among tax authorities can lead to a significant decrease in costs and administrative burdens for businesses engaged in cross-border activities within the Union.

(2)

Tax obstacles to cross-border business are particularly severe for small and medium enterprises , which commonly lack the resources to resolve market inefficiencies.

(2)

Tax obstacles may be particularly severe for small and medium-sized enterprises (SMEs) engaged in cross-border activities, as they commonly lack the resources to resolve market inefficiencies.

(2a)

Fair competition in relation to tax rates should be encouraged at Member State level and also at regional level for regions with fiscal and legislative powers.

(3a)

Improving the internal market is the key factor for encouraging growth and job creation. The introduction of a common consolidated corporate tax base (CCCTB) should improve growth and lead to more jobs in the Union by reducing the administrative costs and red tape for companies, particularly for small businesses engaged in cross-border activities.

(4a)

As the internal market encompasses all Member States, the CCCTB should be introduced in all Member States. However, if the Council fails to adopt a unanimous decision on the proposal to establish a CCCTB, it is appropriate to initiate, without delay, the procedure for a Council decision authorising enhanced cooperation in the area of the CCCTB. Such enhanced cooperation should be initiated by the Member States whose currency is the euro but should be open at any time to other Member States in accordance with the Treaty on the Functioning of the European Union.

(4b)

Certain pronounced forms of tax competition, tax optimisation and tax arbitrage could erode some Member States' revenues and create distortions concerning taxation between capital, which is mobile, and labour, which is less mobile. The reinforced Stability and Growth Pact and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union require Member States, in particular those whose currency is the euro, to comply with strict fiscal discipline, simultaneously applying spending controls and generating sufficient tax revenues. For these reasons, and because the Euro Plus Pact, agreed by the Heads of State or government of the Member States whose currency is the euro, provides that the development of a CCCTB "could be a revenue-neutral way forward to ensure consistency among national tax systems while respecting national tax strategies, and to contribute to fiscal sustainability and the competitiveness of European businesses", it is of vital importance that Member States whose currency is the euro are able to meet their budgetary commitments, in order to safeguard the stability of the euro area as a whole, and it is desirable that the CCCTB is applied as soon as possible to as many companies as possible.

(4c)

In light of the vital role that SMEs play in the internal market, the Commission should develop and make available to SMEs engaged in cross-border activities, a tool that mitigates the administrative burden and costs and that thus enables them to voluntary opt into the CCCTB system.

(5)

Since differences in rates of taxation do not give rise to the same obstacles, the system (the Common Consolidated Corporate Tax Base (CCCTB)) need not affect the discretion of Member States regarding their national rate(s) of company taxation.

(5)

Since differences in rates of taxation do not give rise to the same obstacles, the CCCTB need not affect the discretion of Member States regarding their national rate(s) of company taxation. The Member States therefore also should retain the power to adopt certain incentives for businesses, particularly in the form of tax credit.

(5a)

This Directive does not aim to harmonise Member States' corporate tax rates. If, however, it becomes apparent that the economic efficiency, effectiveness and equitability of corporate taxation would benefit from an introduction of minimum rates, the Commission should consider whether such harmonisation is appropriate when reviewing the application of this Directive. This is all the more important as the evolution of corporate tax rates in the Member States clarifies that tax competition within the internal market has an impact. It is therefore useful, in the spirit of the report entitled "A New Strategy for the Single Market" of 9 May 2010, to determine whether the impact of such competition is beneficial or harmful to a tax culture that is appropriate for the internal market of the 21st century. In particular, attention should be paid to whether the removal of the underlying tension between market integration and tax sovereignty is one of the ways to reconcile the market and the social dimension of the internal market.

(6)

Consolidation is an essential element of such a system, since the major tax obstacles faced by companies in the Union can be tackled only in that way. It eliminates transfer pricing formalities and intra-group double taxation. Moreover, losses incurred by taxpayers are automatically offset against profits generated by other members of the same group.

(6)

Consolidation is an essential element of such a system, since the major tax obstacles faced by companies of the same group that are engaged in cross-border activities in the Union can be tackled only in that way. It eliminates transfer pricing formalities and intra-group double taxation. Moreover, losses incurred by taxpayers are automatically offset against profits generated by other members of the same group.

(6a)

The broad tax base, the consolidation and the discretionary powers of the Member States with regard to their national corporate taxation rates make the CCCTB a tax-neutral operation.

(6b)

In so far as the use of the CCCTB would affect the tax revenue of regional or local authorities, Member States are able to take measures to remedy this in accordance with their constitutional systems and in a manner compatible with this Directive.

(8)

Since such a system is primarily designed to serve the needs of companies that operate across borders, it should be an optional scheme, accompanying the existing national corporate tax systems.

(8)

Since this Directive is primarily designed for the benefit of companies that operate across borders , without however excluding other companies, it is set up as an optional system, allowing all eligible companies to opt in. However, European Companies and European Cooperative Societies, which are, by definition, transnational, are considered to have opted to apply this Directive from two years after its date of application. All other companies that qualify under this Directive, except for micro, small and medium-sized enterprises, as defined in Commission Recommendation 2003/361/EC (1), should also apply this Directive not later than five years after its date of application. When evaluating the impact of the CCCTB, the Commission should examine whether it should also be made mandatory for such micro, small and medium-sized enterprises.

(20)

The system should include a general anti-abuse rule, supplemented by measures designed to curb specific types of abusive practices. These measures should include limitations on the deductibility of interest paid to associated enterprises resident for tax purposes in a low-tax country outside the Union which does not exchange information with the Member State of the payer based on an agreement comparable to Council Directive 2011/16/EU concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation and taxation of insurance premiums and rules on controlled foreign companies.

(20)

The system should include an effective general anti-abuse rule, supplemented by measures designed to curb specific types of abusive practices. These measures should include limitations on the deductibility of interest paid to associated enterprises resident for tax purposes in a low-tax country outside the Union which does not exchange information with the Member State of the payer based on an agreement comparable to Council Directive 2011/16/EU concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation and taxation of insurance premiums and rules on controlled foreign companies. Member States should not be prevented from introducing and coordinating additional measures among each other in order to reduce the negative effects of low-tax countries outside the Union, which do not exchange necessary tax information.

(21)

The formula for apportioning the consolidated tax base should comprise three equally weighted factors (labour, assets and sales). The labour factor should be computed on the basis of payroll and the number of employees (each item counting for half). The asset factor should consist of all fixed tangible assets. Intangibles and financial assets should be excluded from the formula due to their mobile nature and the risks of circumventing the system. The use of these factors gives appropriate weight to the interests of the Member State of origin. Finally, sales should be taken into account in order to ensurefair participation of the Member State of destination. Those factors and weightings should ensure that profits are taxed where they are earned. As an exception to the general principle, where the outcome of the apportionment does not fairly represent the extent of business activity, a safeguard clause provides for an alternative method.

(21)

The formula for apportioning the consolidated tax base should comprise three factors (labour, assets and sales). While the labour and asset factors should have a weight of 45 % each, the sales factor should have a weight of 10 %. The labour factor should be computed on the basis of payroll and the number of employees (each item counting for half). The asset factor should consist of all fixed tangible assets. Intangibles and financial assets should be excluded from the formula due to their mobile nature and the risks of circumventing the system. The use of these factors gives appropriate weight to the interestsof the Member State of origin. Finally, sales should be taken into account in order to ensure fair participation of the Member State of destination. Those factors and weightings should ensure that profits are taxed where they are earned. As an exception to the general principle, where the outcome of the apportionment does not fairly represent the extent of business activity, a safeguard clause provides for an alternative method.

(21a)

The common rules on the calculation of the CCCTB should not give rise to disproportionate administrative costs for companies, in order to avoid damaging their competitiveness.

(23)

Groups of companies should be able to deal with a single tax administration (‘principal tax authority’), which should be that of the Member State in which the parent company of the group (‘principal taxpayer’) is resident for tax purposes. This Directive should also lay down procedural rules for the administration of the system. It should also provide for an advance ruling mechanism. Audits should be initiated and coordinated by the principal tax authority but the authorities of any Member State in which a group member is subject to tax may request the initiation of an audit. The competent authority of the Member State in which a group member is resident or established may challenge a decision of the principal tax authority concerning the notice to opt or an amended assessment before the courts of the Member State of the principal tax authority. Disputes between taxpayers and tax authorities should be dealt with by an administrative body which is competent to hear appeals at first instance according to the law of the Member State of the principal tax authority.

(23)

Groups of companies should be able to deal with a single tax administration (‘principal tax authority’), which should be an authority of the Member State in which the parent company of the group (‘principal taxpayer’) is resident for tax purposes. This Directive should also lay down procedural rules for the administration of the system. It should also provide for an advance ruling mechanism. Audits should be initiated and coordinated by the principal tax authority but the authorities of any Member State in which a group member is subject to tax may request the initiation of an audit. The competent authority of the Member State in which a group member is resident or established may challenge a decision of the principal tax authority concerning the notice to opt or an amended assessment before the courts of the Member State of the principal tax authority. Disputes between taxpayers and tax authorities should be dealt with by an administrative body which is competent to hear appeals at first instance according to the law of the Member State of the principal tax authority.

(23a)

The Commission should establish a new CCCTB forum, similar to the Joint Transfer Pricing Forum, to which companies and Member States can refer questions and disputes relating to the CCCTB. That forum should be able to give guidance to companies and Member States.

(27a)

This Directive contains a radical new approach to an essential component of corporate taxation. The Commission should therefore conduct a thorough analysis and an independent assessment as soon as this can be done in a meaningful way. Because of the cycle that is inherent in the application and implementation of corporate taxation, no such analysis and assessment should be made before the end of five years after entry into force of this Directive. The Commission's analysis and assessment should include an examination of the following: the optional character of the CCCTB, the restriction of harmonisation of the tax base, the apportionment formula, consideration of the practicality of the regime for SMEs and the impact on the tax revenues of the Member States.

(j)

taxes listed in Annex III , with the exception of excise duties imposed on energy products, alcohol and alcoholic beverages, and manufactured tobacco .

(j)

taxes listed in Annex III.

(c)

the technical provisions of insurance undertakings established in compliance with Directive 91/674/EEC shall be deductible, with the exception of equalisation provisions. A Member State may provide for the deduction of equalisation provisions . In the case of a group, any such deduction of equalisation provisions shall be applied to the apportioned share of the group members resident or situated in that Member State. Amounts deducted shall be reviewed and adjusted at the end of every tax year. In calculating the tax base in future years account shall be taken of amounts already deducted.

(c)

the technical provisions of insurance undertakings established in compliance with Directive 91/674/EEC shall be deductible, with the exception of equalisation provisions. A Member State which, pursuant to Article 62 of Directive 91/674/EEC, has introduced a commercial law requirement to constitute equalisation provisions must also make such provisions tax deductible . In the case of a group, any such deduction of equalisation provisions shall be applied to the apportioned share of the group members resident or situated in that Member State. Amounts deducted shall be reviewed and adjusted at the end of every tax year. In calculating the tax base in future years account shall be taken of amounts already deducted.

(a)

a tax on profits, under the general regime in that third country, at a statutory corporate tax rate lower than 40 % of the average statutory corporate tax rate applicable in the Member States;

(a)

a tax on profits, under the general regime in that third country, at a statutory corporate tax rate lower than 70 % of the average statutory corporate tax rate applicable in the Member States;

(b)

under the general regime in the third country, profits are taxable at a statutory corporate tax rate lower than 40 % of the average statutory corporate tax rate applicable in the Member States, or the entity is subject to a special regime that allows for a substantially lower level of taxation than that of the general regime;

(b)

under the general regime in the third country, profits are taxable at a statutory corporate tax rate lower than 70 % of the average statutory corporate tax rate applicable in the Member States, or the entity is subject to a special regime that allows for a substantially lower level of taxation than that of the general regime;

(a)

the impact of the mechanism set up in Chapter XVI on the distribution of the tax bases between the Member States and the impact on their tax revenues;

(b)

the use by and practicability of this Directive for SMEs;

(c)

the advantages and disadvantages of making the system mandatory for SMEs;

(d)

the socio-economic implications of this Directive, including the impact on the global operations of companies and on the competitiveness of eligible and non-eligible companies;

(e)

the impact on a fair and just tax collection in the Member States;

(f)

the advantages and disadvantages of introducing minimum tax rates.