A select committee of Dáil Eireann has concluded that the Draft Directive on CCCTB does not comply with the EU principle of subsidiarity. This opinion has been formally conveyed to the European Union. It is reported that Britain, the Netherlands, Bulgaria, Sweden, Poland, Malta and Romania have done likewise.

Under the EU treaties, national parliaments are empowered to consider and notify the European Commission if they believe the principle of subsidiarity is breached in any draft EU legislation.

The subsidiarity principle requires that action by the EU itself (rather than individual action by individual EU Member States) is necessary if the object of the exercise is to be achieved. The committee, chaired by Mr Charles Flanagan TD, concluded that the CCCTB proposal does not comply with the principle of subsidiarity when measured against this test.

The committee pointed out the complexities inherent in introducing a second parallel tax system for companies, and also identified that the proposals in the Draft Directive appear to be geared towards the needs of very large companies rather than smaller companies.

It seems however that under the scrutiny rules, the negative opinions offered by the eight countries are insufficient to force a review of the CCCTB Draft Directive.

Chartered Accountants Ireland's position paper ‘Europe and Corporation Tax – Setting the Record Straight’ which was published before the draft directive also examines the EU CCCTB proposal and concludes that the introduction of another set of tax rules does not constitute simplification.

The paper also states that CCCTB will damage Europe's capacity to attract foreign investment as tax payable by multinationals in any one EU Member State will no longer be determined by the law of that State alone, but by reference to a complicated formula which can only be computed in retrospect. This will make accurate prediction of tax charges by such companies almost impossible. The position paper concludes that in short, the CCCTB idea is no longer relevant.

The consolidation element is a needless complication no longer required because of the evolution of Transfer Pricing and Double Taxation Agreements, and the development of EU Member State domestic legislation, as mandated by the European Court of Justice. Practical implementation of CCCTB would serve only to distort the distribution of taxes within the European Union, as highlighted by various economic surveys cited in the paper.

Chartered accountants Mr Michael McGrath and Mr Kieran O'Donnell were members of the Committee. The Institute notes the Committee's recommendations as an important intervention by our parliamentarians within the structures of the European Union. The full report of the committee can be found at http://www.oireachtas.ie/documents/committees31stdail/standingorder103/Report12052011.pdf