1.INTRODUCTION

Taxation is central to the EU's work to build a stronger, more competitive and fairer economy, with a clear social dimension. Europe needs a tax system that fits its internal market and that supports economic growth and competitiveness, attracts investment, helps to create jobs, fosters innovation and upholds the European social model. Taxation should provide stable revenues for public investment and growth-friendly policies. It should ensure that all businesses enjoy a level-playing field, legal certainty and minimal obstacles when operating cross-border. It should be part of a wider tax system in which citizens have confidence, because it is fair and meets society's socio-economic needs. The EU's priorities in taxation are therefore focussed on these goals.

2.IMMEDIATE ACTION TO MEET IMMEDIATE NEEDS: REFORMING CORPORATE TAXATION

The Commission has set an ambitious agenda to make corporate taxation fairer and more effective; better adapted to the modern economy and more responsive to emerging challenges in this field. This agenda is advancing rapidly and many important milestones have already been met. All of the initiatives announced in the Commission's Action Plan for Fair and Effective Taxation have now been launched, and many new proposals have already been adopted by Member States. The Commission is also pushing the scope of its work beyond the Action Plan. As shown in the Communication on further measures to enhance transparency and the fight against tax evasion and avoidance, which followed the Panama Papers revelations, it is ready to develop swift and effective responses to issues as they arise . In addition, the Commission has carried out state aid investigations into whether certain Member States granted tax advantages to selected multinational companies , to safeguard a fair and competitive environment for all businesses in the EU.

The Commission's first line of action was to increase tax transparency, as an essential foundation for any further reforms. Within a period of 12 months, Member States agreed on proposals for the automatic exchange of information on tax rulings and country-by-country reports of tax-related information concerning multinationals . This will bring a new and unprecedented level of transparency and cooperation between tax authorities in the area of corporate taxation. The Commission also proposed public country-by-country reporting for multinationals, to provide citizens with greater oversight of companies' tax practices. This proposal, which is currently being negotiated by the Council and the European Parliament, should help restore public confidence in corporate taxation and ensure that businesses are not faced with a patchwork of national public disclosure rules. A proposal to allow tax authorities access to national anti-money laundering information is expected to be agreed before the end of the year. The European Parliament and Council have also started to work on their positions on proposed amendments to the Fourth Anti-Money Laundering Directive, and should advance swiftly for trilogues to begin by early 2017. In addition, the Commission has started to examine the most appropriate framework to implement the automatic exchange of information on beneficial ownership, at European level, and is exploring the best way to increase oversight of enablers and promoters of aggressive tax planning schemes. This increased tax transparency across Europe will help to expose aggressive tax planners, uncover harmful tax practices and stabilise a corporate tax environment built on openness and trust.

In parallel, the Commission is also working to ensure that all companies operating in the EU pay their taxes where profits and value are generated. This principle is essential for fair and effective taxation, but can only be effectively achieved in a Single Market through common and coordinated measures. Therefore, the Commission proposed a new Anti-Tax Avoidance Directive , setting out legally-binding anti-abuse measures for the entire EU, to block some of the most prevalent forms of base erosion and profit shifting. This legislation, which Member States adopted in July 2016, allowed Member States to implement in a swift, coordinated and coherent way, the commitments they made under the OECD/G20 Base Erosion and Profit Shifting (BEPS) project. Member States' preferential regimes and transfer pricing rules are also being reviewed, to ensure a common EU approach to new international standards. This is critical to provide certainty for businesses as reforms are implemented and to prevent new loopholes emerging in the Single Market.

Finally, the Commission has presented measures to promote tax good governance globally, to ensure a fair and level-playing field between the EU and its international partners. Member States have endorsed the new External Strategy for Effective Taxation , presented by the Commission in January 2016, to protect their tax bases against base erosion risks from abroad. A key component of this Strategy is a new EU listing process, to deal with non-cooperative tax jurisdictions and encourage all third country jurisdictions to meet international tax good governance standards. The first steps in this listing process have already been taken and the common EU list should be finalised in 2017. This will provide Member States with a powerful tool to deal with countries that refuse to play fair in tax matters. The EU's Financial Regulation has also been revised to prevent EU funds from being routed through tax havens, and work is underway to strengthen the tax good governance clauses in EU agreements with third countries.

3.A POSITIVE, FORWARD-LOOKING AGENDA

The initiatives set out above are vital to protect Member States' tax bases, provide a level-playing field for businesses and ensure fair and effective taxation for all taxpayers. They address the most pressing problems in corporate taxation today. However, for the longer term, there is a need to go further. Short term fixes can soon become outdated, as business models and tax planning techniques evolve faster than new responses can be devised. In addition, piecemeal updates to international, EU or national tax rules create turbulence for both the tax administrations and the businesses that need to adapt to them. To boost jobs, growth and investment, it is necessary to create a favourable tax environment for business, by reducing compliance costs and administrative burdens, and by ensuring tax certainty. The importance of tax certainty in promoting investment and growth has recently been recognised by the G20 leaders, and has become the new global focus. Member States need to find a balance between implementing necessary reforms and providing a steady, clear and predictable tax environment for businesses.

The EU needs a positive, forward-looking framework for corporate taxation. It must be growth-friendly, efficient and fair, and fully support the EU's wider policy priorities, now and in the future. This is the rationale behind the Commission's proposal to re-launch the Common Consolidated Corporate Tax Base (CCCTB). The CCCTB can meet the two primary demands of businesses and citizens in Europe today – sustainable growth and social justice – and reinforce the EU's overall economic and social agenda. Indeed, analysis shows that the CCCTB can lift investment in the EU by up to 3.4% and growth by 1.2%.

The Commission first proposed the CCCTB in 2011, with a view to enhancing the Single Market for businesses. The proposal was ambitious and robust, but its magnitude led negotiations in the Council to stall. However, the European Parliament, businesses, stakeholders and many Member States retained strong support for the idea of the CCCTB, given the many benefits it had to offer. Moreover, in the past few years, it has become clear that the CCCTB offers more than just a business-friendly tax system for a stronger Single Market.

Therefore, in the June 2015 Action Plan, the Commission announced that it would re-launch this important project through a more manageable two-step process. The first step focusses on securing the common base. Once this is implemented, the more complex aspect of consolidation will be introduced. Many of the most important benefits of the CCCTB lie with the consolidation aspect. Therefore, this second step in the re-launched CCCTB cannot be neglected or put aside. The work on this Package will only be complete once the full CCCTB is in place.

The re-launch of the CCCTB provides the opportunity to update the original proposal and align it with new challenges emerging in the global tax environment. The most notable change is that the CCCTB will be mandatory for all financial accounting groups with consolidated group revenues of more than EUR 750 million. This should help to maximise its potential as an anti-avoidance tool. It also means that businesses will know where they stand when it comes to the EU's anti-abuse rules and will not have to make unnecessary adjustments. As such, it will help to create a more predictable environment for businesses in the EU.

The Commission has also introduced two new elements into the proposal which directly support the EU's wider economic agenda. Research and development costs will be given a super-deduction, to encourage R&D and innovation, which are key drivers of growth. Moreover, to support small and innovative entrepreneurship, an enhanced super-deduction will be given to small starting companies without associated enterprises. The CCCTB will also address the distortive preferential treatment of debt compared to equity, as a contribution to a strong Capital Markets Union and greater financial stability in the EU.

4.MODERN, SIMPLE, CERTAIN: A BETTER AND MORE EFFICIENT TAX ENVIRONMENT FOR BUSINESSES

Businesses in the Single Market need a simple, stable and legally certain environment in which to thrive. They should encounter minimal tax obstacles when operating cross-border and should not be burdened by unnecessary administrative burdens and costs. The EU needs a corporate tax framework adapted to the realities of 21st century business, which encourages enterprise, attracts investors and facilitates all companies – big and small.

4.1 A Single Corporate Tax System For A Single Market

The CCCTB will considerably improve the functioning of the Single Market from a tax perspective. Cross-border companies will benefit from a single set of rules to calculate their taxable profits in the EU, rather than a medley of different national systems. They will be able to file a single tax return for all their EU activities through a "One-Stop-Shop" system, dealing with just one Member State rather than multiple tax authorities. Consolidation will also mean that losses in one Member State can be automatically set off against profits in another, thereby allowing cross-border companies to enjoy the same treatment as purely domestic ones.

In the proposed Directive to re-launch the CCCTB, the Commission has kept the same ambitious approach to consolidation as was in the original proposal. However, the two-step approach will delay this advantage. To compensate, the Commission has proposed that, until consolidation is agreed, companies should have access to a simple, robust and temporary system of cross-border loss offset within the common base.