COMMUNITY LISBON PROGRAMME: COMMON CONSOLIDATED
CORPORATE TAX BASE (8231/06)
Letter from the Chairman to Rt Hon Dawn
Primarolo MP, Paymaster General, HM Treasury
Thank you very much for Explanatory Memorandum
8231/06 on a Common Consolidated Corporate Tax Base which Sub-Committee
A considered at their meeting on 23 May. The Committee have decided
to hold the Communication under scrutiny.
Whilst the Committee were keen to stress that
they would not support the introduction of a common tax rate,
they were not convinced that a common corporate tax base is as
misconceived as the Explanatory Memorandum indicates. The Committee
consider that there may be some advantages for companies from
a common tax base and would be interested to hear what representations
you have had from large corporations on this issue.
The Committee also noted that the Commission's
work aims to produce a common set of corporate tax rules to either
replace or operate alongside national tax rules. Could you please
clarify how such rules could operate alongside existing national
Finally the Committee would appreciate more
details on whether, given the current state of play, any common
consolidated tax base arising from this work will be likely to
give Member States the ability to add their own national obligations
23 May 2006
Letter from Rt Hon Dawn Primarolo MP to
I am writing in response to your letter of 23
May on Explanatory Memorandum 8231/06 on the Commission's technical
work on a Common Consolidated Corporate Tax Base (CCCTB).
I will take each of your points in turn.
Firstly, you say that the Committee would be
interested to hear what representations we have had from large
corporations on the issue of a common tax base.
We have received no formal representations on
the technical work on a CCCTB. However, HM Treasury has regular
contacts with business of course, including with large corporations,
on a whole range of issues. To the extent that comments have been
made on the Commission's technical work on a common tax base,
it would seem that such businesses would only see merit in a common
consolidated tax base which was optional for companies.
Secondly, you ask for clarification as to how
a common set of corporate tax rules could operate alongside existing
As far as the optional nature of such a base
is concerned, the Commission appears to envisage that each tax
authority of a Member State participating in a CCCTB would be
required to administer in parallel two corporate tax systems (the
domestic system and the common base). In COM(2006) 157, the Commission
acknowledges that there are potential difficulties with the idea,
saying "... the simultaneous operation of two corporate tax
bases admittedly may raise specific issues for tax administrations."
As noted in Explanatory Memorandum 8231/06,
the technical exercise which is being undertaken by the Commission
is an extremely complex one. Notwithstanding the deadline which
the Commission has set itself for the completion of its work,
it would appear that there has been no consideration to date in
the Commission's CCCTB Working Group as to whether and, if so,
how a CCCTB which was optional for companies might actually be
made to work. One obvious potential difficulty would appear to
be that such an approach would seem bound to provide companies
with more rather than less opportunities for tax arbitrage and
tax avoidance and hence pose an increased risk to corporate tax
Thirdly, you say that the Committee would appreciate
more details on whether, given the current state of play, a common
consolidated tax base arising from the Commission's work would
be likely to give Member States the ability to add their own national
obligations to it. I assume that what you have in mind here are
national tax incentives. The issue of such incentives, including
R&D, appears on the Commission's work programme for its CCCTB
Working Group. However, there has been no technical work to date
and, according to COM(2006) 157, the Commission's intention is
to start technical work on tax incentives early in 2007, with
a view to this being broadly completed by the end of the year.
Whether and, if so, the extent to which a common consolidated
tax base arising from the Commission's technical work would leave
any flexibility at national level remains unclear.
You might also be interested to know that, following
on from the exchange of views on the question of a common consolidated
corporate tax base at the Informal ECOFIN Council on 7-8 April,
the Commission introduced its Communication (COM(2006) 157) at
the ECOFIN Council meeting on 7 June. There was a further discussion,
with a range of views being expressed. No conclusions were drawn.
I hope you find this information helpful.
16 June 2006
Letter from the Chairman to Rt Hon Dawn
Thank you very much for your letter dated 16
June on EM 8231/06: progress on a Common Consolidated Corporate
Tax Base. This was considered by Sub-Committee A at their meeting
on 4 July when it was decided to maintain the scrutiny reserve
pending clarification of some issues.
On the representations from large companies
regarding a common consolidated tax base the Committee noted that
you have conducted some informal discussions. However, we were
concerned that no formal assessment of the views of such corporations
had been conducted either by the Government or by the Commission
as part of the working group. Do you consider that consultation
would inform the work of the group? Do you plan to conduct any
such consultation before the conclusion of the group so as to
allow large corporations to contribute their opinions at an early
stage in the process?
On the difficulties of administering two systems
simultaneously, the Committee suspect that there will be considerable
problems. We consider that it is important to address such difficulties
at an early stage in working group negotiations. Do you plan to
raise this issue during discussions and bilaterally with other
EU tax authorities?
On the ability to add national incentives to
the tax system, the Committee noted that no discussion has yet
taken place and would like to be informed of the results of these
discussions when they do take place.
5 July 2006