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Tuesday, 19th March 2024
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McCreevy spells out his opposition to CCCTB Back  
The European Commission's plans to introduce tax harmonisation is 'sinister', 'unworkable' and further evidence of the Commission's policy of 'camouflag(ing) the end purposes of proposals until you have put in place the building blocks to achieve them' Internal Markets Commissioner Charlie McCreevy told Irish investment professionals on May 11th.
EU Internal Markets Commissioner Charlie McCreevy was in fine form at the Securities & Investment Institute annual lunch on May 11th, when he rubbished the European Commission's attempts to introduce some form of tax harmonisation in Europe. He also expressed some doubts over whether Member States really will have an option to opt out of the planned Common Consolidated Corporate Tax Base (CCCTB), and wondered whether the Commission's purpose was to, 'camouflage the end purposes of proposals until you have put in place the building blocks to achieve them'.

At the event he set out a number of points which illustrated why he is concerned over efforts to harmonise taxes across Europe.

Firstly, he said that the claim that the CCCTB would have no impact on tax rates is 'unsustainable'. This is because once the base of profits that is taxable is clear and uniform across the Member States, the changes will result in a narrower taxable base than before for some (in other words less income to tax), and for others it will mean a wider base than before (more income to tax). Which, according to McCreevy, would mean that, 'other things being equal, the change in the size of the tax base for each Member State would mean that each Member State would have to either raise or reduce its corporate tax rate to generate the same revenue as at present'.

McCreevy then went on to call the second leg of the scheme, which deals with sharing out the base between Member States, 'more sinister'.

'You might think that the tried and tested way - the so called 'value added' approach whereby tax is levied where the economic added value is created - would be the basis of the share out. But this is certainly not what the designers of this scheme have in mind: they have put forward all sorts of different formulae including a share out based on criteria such as a Member State's sales or GDP. Clearly any such share out would benefit Member States with large markets and big GDPs at the expense of Member States with small markets and small GDPs. This would be particularly unfair to the smaller, poorer Member States of Eastern Europe- and places like Portugal and Malta - who are seeking to build their economies from a low base, have small domestic markets, and relatively low GDPs. Under a formula that included sales and GDP in the calculation those Member States would continually be on the back foot and find it almost impossible to catch up'.

As it stands, Member States will have the option of either opting in, or opting out, of the CCCTB. However, McCreevy expressed great scepticism over whether or not this will actually be the case, saying, 'optionality is not workable'.

He explained that, 'by putting optionality into the first version of this proposal there is a much bigger chance of getting the proposal approved and thus getting the building blocks in place for the next step'.

After a year or two of the opt in/opt out scheme, McCreevy predicted that Member States will complain about tax leakage, tax arbitrage, and regime shopping as a result of not all states complying with the CCCTB, which would, McCreevy said, 'provide the perfect excuse for the setting up of a Commission official - inspired expert group - that shows that the proposal isn't working because of its optionality: companies - surprise, surprise - are shopping between the parallel systems. This will provide the permanent officials in DG Tax with the excuse to say that the optionality should go and that the building blocks are in place to make it go. This is how certain parts of European policy making works. Camouflage the end purposes of proposals until you have put in place the building blocks to achieve them'.

Although, according to McCreevy, 'Commission officials rarely let an idea die', he is not alone in his opposition to the proposals, and he, 'hopes and believes that it will become clear following a full discussion at that seminar that what is envisaged by some of those seeking to foist a CCCTB on Europe is quite different to what appears on the label and that the real agenda of some of those seeking to push this agenda is one which would undermine competition, undermine small and emerging markets, undermine inward investment, and undermine the long term growth and employment prospects of the Union'.

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