During his address to the Dublin Economics Workshop on Saturday 13 October, Minister Cowen stated that the CCCTB has little support amongst the majority of Member States and that his objections are twofold “principled and practical”. This was the Minister's first public comment on CCCTB since the CCCTB Working Party meeting in September (see Section 1.33 for further information on the meeting).

In summary,

• The Minister does not believe that the CCCTB would reduce the tax-related compliance costs of business and improve the competitiveness of Europe.
• According to the Minister, the right to choose how one is taxed is not a matter only of economic or industrial or social policy but a civic right of the citizens and taxpayers in a Member State.
• He said that the CCCTB would be inflexible. It would hamper individual Member States from taking account of local needs while making it extraordinarily difficult for Europe as a whole to adapt to changes in the international business and technological environment in the global business cycle.
• Greater tax harmonisation could lead to the creation of a less competitive, high tax economic entity in relation to other economic blocks. He stated that a less competitive EU would mean that business would move out of Europe and the competitiveness of the EU would suffer.

The Minister's speech is available at http://www.finance.gov.ie/viewdoc.asp?DocID=5039.

ESRI Research on CCCTB

Research published by the ESRI in October suggests that CCCTB may be more a crock, rather than a crock of gold, for participant countries if the lunacy does go ahead.

While organisations like ICAI can, and do, point out the pragmatic difficulties with the CCCTB project, economic analyses of the consequences are scarcer on the ground.

The research, titled “Is EU Coordination Needed for Corporate Taxation” originated in the Netherlands Central Planning Bureau, and is accompanied by a response from an Irish perspective. In very brief summary, the research concludes that there would be little if any gain in terms of economic efficiency at the European level from the implementation of a CCCTB. According to the report – “The gains from a reduction in compliance costs and the elimination of transfer pricing are offset by the efficiency losses from reallocation. Corporate tax revenues decline on average by about 2 per cent due to the expansion of firms in member states with low tax rates and/or narrow tax bases.”

There is another, perhaps even more important, conclusion however in that the research explores what the consequences might be if CT rates were harmonised in tandem with the CCCTB. “Harmonisation of tax rates or a minimum tax rate would lead to similar results, or even to net losses. When consolidation of the tax base is combined with a harmonised tax rate, there is scope for small aggregate gains at EU level (of the order of 0.14 per cent of GDP). However, the effects vary across countries, with some countries gaining, and others, including Ireland, losing from such a reform.”

So, in economic terms, CCCTB doesn't work without harmonisation of rates. And even if rates are harmonised, the gain would be in the order of one tenth of one percent of EU GDP, at the expense of countries with progressive tax regimes like Ireland. Not exactly the kind of stuff that warrants an extra star on the EU flag.

The economic analysis of the ESRI publication is both timely and welcome, and makes a major contribution to earlier work such as that of the University of Oxford Centre for Business Taxation. If it does overlook a factor, it is the time, effort and energy that has already been wasted by the Commission on this redundant and damaging exercise.

The full documents are available at
http://www.esri.ie/publications/latest_publications/view/index.xml?id=2452.