MEPs have voted in favour of setting up a Compulsory Common Consolidated Corporate Tax Base (CCCTB) among the 27 EU member states – a measure opposed by Malta and seven other EU members.

Although taxation remains the sole competence of the member states, this latest vote by the European Parliament will continue to exert pressure on those countries opposing the European Commission’s proposal to change tack.

Last year, the Commission formally tabled plans to create a CCCTB to be introduced on a staggered basis starting with cross border companies operating in various member states. The plan is to streamline the common tax base on all companies over a period of years.

However, many member states, including Malta, are opposing the proposal at European Council level fearing that this will be the first step towards creating a harmonised company tax across the EU.

Following the vote, the European Parliament’s rapporteur, Belgian European People’s Party MEP Marianne Thyssen said that a harmonised system for calculating the tax base makes it possible for companies to consolidate the results of their individual branches, allowing them to compensate for any losses a group member might have.

“This makes it easier for companies to have and keep branches in different member states and it reduces red tape. In addition, the system ensures that economic and social aspects are more important than purely fiscal reasons when companies choose their locations”, said Ms Thyssen.

Despite the European Parliament vote, Malta is expected to keep opposing the Commission’s proposal which needs unanimity to be approved.

A government spokesman insisted that while Malta will continue to consider the proposal adopted by the Commission very objectively and take part in all discussions constructively, “it will have serious problems to accept a Common Consolidated Corporate Tax Base which does not address the island’s concerns.”

The principal area of concern for Malta is the inclusion in the proposal of a revenue apportionment formula which rewards inefficient economies that are still dependent on old labour-intensive economic sectors and penalises those economies where productivity is relatively high or which have moved to higher value-added economic activities.

According to Malta, as a result of this formula, the current Commission proposal will redistribute wealth between member states which will improve the fiscal position and sustainability of some countries while decreasing that of others, not least through the erosion of their tax base.

There is also the probability that companies opting for the CCCTB will begin to look outside the EU to locate their investments if certain tax advantages are no longer available to them in the EU while they remain available elsewhere. According to Malta, this will have an impact on those EU economies that are dependent on foreign direct investment for their growth.

“The government would have preferred to have the Commission adopt a proposal that did not create such problems, rather than having to try to amend the Commission proposal in Council where those who stand to gain unearned revenues under the proposal will defend it against those who stand to lose earned revenues,” the spokesman said.

Bulgaria, Ireland, the Netherlands, Poland, Romania, Sweden and the UK are also opposed to the Commission proposal.