Speaking at a conference recently organised by FEE, the European representative association for accountants, Tax Commissioner Algirdas Semeta indicated that the Common Consolidated Corporate Tax Base (CCCTB) is not the only EU tax policy initiative in play.

As is customary, the Commissioner indicated his support for the CCCTB project and reiterated what he sees are the benefits – simpler rules, cross-border loss offset and fewer difficulties with transfer pricing issues. But Mr Semeta also referred to current difficulties with double taxation issues. It seems that the Commission is working on a strategy to improve existing EU instruments to combat double taxation. This includes revisiting the Interest and Royalties Directive and the Arbitration Convention on transfer pricing. The Commissioner also said that new instruments such as a binding resolution mechanism to eliminate double taxation in the case of a dispute between Member States would be developed.

Anything the European Union does in the area of direct taxation has to be done with the unanimous approval of all of the EU member states. It would seem that some of the areas being addressed in the new double taxation strategy could be regarded as a fallback, should the CCCTB directive stall. Revisions to the Interest and Royalties directive, or new binding resolution mechanisms, would be unnecessary for Corporation tax purposes at least if CCCTB were to go ahead.

In his speech, Commissioner Semeta did not distinguish between tax avoidance and tax evasion, describing both as threats to government revenues in many countries. He noted that “further efforts are needed notably to counter aggressive tax planning. I intend to make concrete proposals, in close cooperation with other international partners such as OECD, G20 and UN.”

The Commissioner concluded his remarks with a short discussion on the Financial Transactions Tax proposals, suggesting that the FTT would be applied by reference to where the financial institution was established so that it would be harder to avoid simply by relocating where activities take place.

It seems inevitable that there will be greater activity within the EU in the coming years towards shaping Direct Tax policy. Such activity can only be successful if there is top-down support from EU Member State governments. Against a backdrop of continuing economic turmoil, it is entirely possible that such support might be more readily forthcoming.

The full text of the Commissioner's speech is available at http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/11/650&format=HTML&aged=0&language=EN&guiLanguage=en