The ICAI has expressed serious reservations about EU Commission plans to impose a Common Consolidated Corporate Tax Base (CCCTB) on all Member States. This would mean that groups of companies would pay tax on their profits calculated on a common set of rules, no matter where they operated. The Member States would then divide out the tax between them.

The Commission convened a meeting of tax experts from the 25 Member States on 12 December to discuss the proposals. ICAI was invited to provide the sole Irish expert representative. ICAI have been monitoring the progress of this EU project since its inception and this meeting gave an opportunity to present members’ views directly to Commission Officials.

The following aspects were discussed at the meeting:

• How to compute Taxable Income
• International Aspects, i.e. the interaction of a new tax base with group companies located outside the EU
• Personal Scope; in this context, the type of corporate entity to be included as a “company”
• Consolidation/Group Taxation, which included how groups are to be defined, and how group relief for losses is to be dealt with
• Financial Assets (including participation exemption and dividends)
• Administrative and Legal Framework, including suggestions that there would be a European Collector General and Revenue audits across several countries
• Consolidated Tax Base Sharing Mechanism – how the EU Member States would divide out their share of the corporation tax amongst themselves.

It is fair to say that consensus was not reached on any point, except that adopting any form of common consolidated tax base should be optional for groups of companies – yet another set of rules to deal with! ICAI argued in particular that:

• New definitions for core tax concepts such as residence and Permanent Establishment would dismiss the valuable case law and precedent built up over many years. Businesses need certainty in their dealings. Because something is new, it doesn't mean it is simpler.
• It would be all but impossible to arrive at definitions of which companies should be “in” or “out” because of the variety of types of corporate entity in Europe, and differing approaches as to what structures are tax transparent or not.
• A group of companies is not a static entity; companies join, leave or the ownership structure can change. A group could have foreign intermediate holding companies. The implications of these factors in arriving at the appropriate tax share, or for that matter allowing relief for losses, is not being addressed.
• Any administrative arrangements which increased the burden of compliance on companies would be unacceptable, and it is very hard to see how the proposed arrangements would reduce compliance or enhance simplicity