Tax deductibility of corporate interest expense - CIOT comments

6 Jul 2017

Our response was submitted on line and attached is a pdf of this on-line response and the additional paper referred to in it. Please note that our substantive answers begin on page 8 of the pdf document generated by the Commission‚ s website.

The CIOT does not believe that a new common tax base, either a 3CTB (common consolidated corporate tax base) or a 2CTB (common corporate tax base without consolidation), would be an effective tool against aggressive tax planning, or be attractive to business. We set out the arguments as we see them against pursuing a policy of a new common tax base, particularly at this time. Fundamentally it would represent a significant centralisation of power. While whether this is acceptable is, ultimately, a political question and, therefore, beyond the scope of our comments, we observed that the strength of the opposition already visible among some Member States means that this is a proposal which is unlikely to be adopted, at least not across the whole of the EU. We also noted the global rejection of the concept of a common tax base and apportionment as part of the BEPS debate.

We also commented that this is not an appropriate time to be considering changes in the direction of an EU common base given the international agreement on the BEPS outcomes. The BEPS outcomes have addressed many of the issues identified as presenting problems within the existing system, and we consider that time should be allowed for these to be implemented before considering again whether any form of common tax base in the EU is practical or desirable.

We suggested that, where appropriate, the EU Commission should follow the BEPS outcomes ‚ for example on hybrids and interest deductions, rather than attempting to tackle this in a manner which is not compatible to this and would not, therefore, lead to common taxation with non-EU countries.

Finally, we urged to Commission to work on clarifying where State Aid rules apply.

Technical Team