The European Commission has addressed concerns raised by the House of Representatives regarding its proposal for a common consolidated corporate tax base.
The Vice President of the EC Marcos Sefcovic, in a letter to Speaker of the House Michael Frendo, said the coexistence of different taxation regulations in 27 states meant that companies were facing significant fiscal obstacles which discouraged them in their transborder activities. This created obstacles in the internal market and increased expenses for businesses.
He said the situation was particularly serious for small and medium enterprises that often lack the necessary resources to overcome these inefficiencies. Action was needed because there was the risk of unnecessary expenses for conformity in the single market.
The Commission was convinced that only agreed action on a European level could address the challenges presented by corporate taxation in a single market in a systematic mode, ensuring benefits for businesses and public national finances.
The objectives of the proposed directive could not be achieved by member states if they acted on their own.
The EC proposal stipulated an option for companies to choose a unique set of rules for the computerisation, consolidation and distribution of taxation from associated enterprises across the union.
These rules included, among others, exemptions from transborder losses, the internal restructuring of the group exempt of tax and the elimination of transfers of complicated intragroup prices. These problems could only be solved through common regulations.
The proposed directive, said the EC, would create favourable conditions for transborder investment in the internal market. Medium enterprises could save up to 67 per cent in expenses.
It also claimed that the directive would not affect the sovereignty of the member states in fixing the fiscal corporate tax. The proposal was optional and did not oblige companies which would not operate outside their country to apply these common rules.
However, national taxation authorities would have to make good for certain one-time financial and administrative expenses. The positive impact of the common corporate tax base would make amends for these additional expenses.
The EC also said that the proposed directive was not different, in legal terms, from other EU directives on direct taxation. It did not penalise higher productivity.
The Commission said it was open to other alternative proposals.