Proposals for a common consolidated corporate tax base needs urgent debate

9 Dec 2016 11:29 AM

European Scrutiny Committee recommends debate on a reasoned opinion saying EU tax proposals do not respect the principle of subsidiarity

The Commission has put forward proposals for a common consolidated corporate tax base which:

  1. establish common rules for the tax base for corporation tax and
  2. require one tax return in Member State of the main establishment of a group of companies, with the overall group profit (or loss) being apportioned between Member States according to a formula based on sales/pay/employees/assets.

The EU system would be compulsory for large cross border groups and optional for smaller companies.

In its report "Taxation: a common consolidated corporate tax base" the Committee considers that direct taxation is a matter for which individual Member States have a particularly strong interest as it not only governs the revenue available to each Member State but is also inextricably linked to their social and other policy choices. This is reflected in the fact that powers in this area can only be exercised by the EU if Member States unanimously agree.


The Committee recommends that the House consider a reasoned opinion on the following grounds:

  • The Commission has not adequately provided evidence of the change in circumstances since its previous proposal which had acknowledged adverse effects on investment, employment and GDP.
  • The tax base is an essential element of Member States' tax sovereignty, effecting not only the tax revenue but social and other policy choices. The common corporate tax base removes many of these choices[…] Leaving Member States freedom to choose the tax rate without leaving them freedom in respect of the tax base interferes too much with their legitimate freedom in respect of corporation tax.
  • The fairness of its tax system, including the balance between equity and debt, is a matter for which Member States are pre-eminently responsible and accountable to their own people, and which needs to be looked at in the round in the context of each Member States' tax system taken as a whole, without the EU imposing its solution in respect of one tax.
  • Regulating corporation tax at an EU level means that any changes have to be unanimously agreed at the EU level. This is too cumbersome to react to changes in circumstances […].
  • The Common Consolidated Corporate Tax Base is mostly limited in its effects to the EU, whereas the tax avoidance problems that these proposals are seeking to address are global or at least extend beyond the EU.


These proposals replace, with minor amendments, one from 2011 (subsequently withdrawn by the Commission) on which the House and seven other chambers issued a reasoned opinion. 

If national Parliaments or Chambers consider that a draft EU legislative act does not comply with the principle of subsidiarity, i.e., the principle that decisions are taken as closely as possible to the citizens they may present a "reasoned opinion" to the President of the Parliament, Council and Commission. There is an eight week deadline to do this; the deadline for this proposal is 3 January 2017. 

If enough national Parliaments present reasoned opinions, the so-called "yellow card" or "orange card" procedures are triggered whereby the Commission must review the draft law.