COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposals for a Council Directive on a Common Corporate Tax Base and a Common Consolidated Corporate Tax Base (CCCTB)
Date: 2016-10-25
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, approximation of laws, basis of tax assessment, corporation tax, cross-border cooperation, single market, tax harmonisation, tax law, tax system, transnational corporation

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   EUROPEAN COMMISSION  Strasbourg, 25.10.2016  SWD(2016) 342 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposals for a Council Directive on a Common Corporate Tax Base and  a Common Consolidated Corporate Tax Base (CCCTB) {COM(2016) 683 final} {SWD(2016) 341 final}  
 
 
Impact assessment on a Common Consolidated Corporate Tax Base (CCCTB) 

Executive Summary Sheet 

A. Need for action 

Why? What is the problem being addressed? Maximum 11 lines 
Currently,  28  different  corporate  tax  systems  in  the  EU  create  opportunities  for  aggressive  tax  planning, 
negatively  affecting  tax  morale  and  tax  fairness.  This  tax  patchwork  also results  in high compliance costs  and 
hampers investment. Most national tax systems favour debt over equity financing, which increases debt levels 
and  affects  the  resilience  of  the  economy.  In  addition,  businesses  in  the  EU  underinvest  in  research  and 
development compared to other big economies. 

These problems are driven by the internationalisation of businesses and increasingly mobile profits. At the same 
time, tax bases are decided nationally. This creates incentives for Member States to unilaterally protect their tax 
bases and attract mobile profits. Unilateral action cannot address the key problems. They increase complexity, 
further hampering the evolution of the single market and adding obstacles to investment and growth.  

Businesses  are  affected  in  a  variety  of  ways.  Notably,  those  active  cross-borders suffer  from  high  compliance 
costs,  whereas  those  engaged  in  aggressive  tax  planning  benefit  at  the  expense  of  other  businesses  and 
citizens. 

What is this initiative expected to achieve? Maximum 8 lines 
One  important  aim  is  to  enhance  the  fairness  of  the  tax  system  by  addressing  some  of  the  root  causes  of 
corporate  tax  avoidance. This  should  (i) significantly  reduce cross-border  tax planning,  (ii)  create  a  more  level 
playing field between domestic and multinational companies, (iii) ensure that companies pay a fair share of the 
tax burden, and (iv) enhance general tax payer morale. At the same time the initiative aims to stimulate growth 
and  investment by (i) simplifying the complex corporate tax system  in the EU to reduce compliance costs and 
administrative burden; (ii) eliminating double taxation risks and other existing discriminations and restrictions, (iii) 
reducing tax-induced distortions of investment and financing decisions; and (iv) creating incentives to invest in 
the EU, inter alia by supporting R&D and innovation. 

What is the value added of action at the EU level? Maximum 7 lines  
The EU added value is to further improve capital mobility within the Union by decreasing compliance costs and 
cross-border tax obstacles. At the same time, EU action  ensures that the activities of multinational companies 
within the EU do not avoid a fair level of taxation. A common approach to an EU corporate tax base helps to re-
establish the link between taxation and value creation.   

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why? Maximum 14 lines  
The main policy option that has been considered is a proposal for a common consolidated corporate tax base. A 
key choice to be made relates to the scope of such a tax base, i.e. to whom it would apply. The main options 
that have been considered are to make the CCCTB mandatory for all firms or just a subset of firms. A variety of 
options have been considered to address the bias towards debt induced by current tax systems. Two principle 
actions  are  available:  allowing  deductibility  of  both  debt  and  equity  financing  costs  or  disallowing  both.  With 
respect to R&D incentives, the central options consider a tax allowance for expenses for R&D investments with 
varying degrees of generosity.  

Valuing the different options has led to a preferred option: a CCCTB mandatory for large companies, equipped 
with  an  'allowance  for  growth  and  investment'  and  with  an  allowance  for  R&D  expenses.  The  allowance  for 
growth and investment grants deductions for financing costs for debt and equity within limits to avoid abuses and 
tax planning. The allowance for R&D expenses is designed to at least maintain existing R&D tax incentives. The 
analysis shows that the CCCTB has clear advantages over the alternative of not taking any action.  

Who supports which option? Maximum 7 lines  
A  re-launch  of  the  CCCTB  received  general  support  by  all  stakeholder  groups.  Support  was  highest  among 
NGOs,  private  individuals  and  other  respondents  to  the  consultation,  but  also  among  companies,  in  particular 

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among SMEs. NGOs, SMEs and private individuals are also strongly in favour of making the CCCTB (partially) 
mandatory; large enterprises are against this. On the other side, a clear majority of all stakeholders was in favour 
of creating an opt-in to the CCCTB. Companies, small and large, were also very much supporting a favourable 
treatment of  R&D  and  the  proposal  to address  the debt-equity  bias with  an  allowance  for equity  within  the  re-
launch. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                       
Implementing  the  preferred  choice  is  expected  to  increase  the  fairness  of  tax  systems  and  to  create  a  level 
playing  field  by  effectively  removing  incentives  for  aggressive  tax  planning  in  the  EU.  This  would  facilitate  to 
ensure that corporations pay a fair share of the tax burden and enhance taxpayer morale. Furthermore, cross-
border tax obstacles would be effectively eliminated within the EU. The distortions in the financing decisions of 
companies  are  reduced  with  an allowance  for  growth  and  investment  which  puts  equity  and debt  financing  on 
similar footing. R&D tax incentives are not only maintained but also enhanced and streamlined.  

The  expected  economic  benefits  of  the  proposal  are  positive.  The  CCCTB  with  an  allowance  for  growth  and 
investment  would  lead  to  an  increase  in  investment  and  employment  of  up  to  3.4%  and  0.6%,  respectively. 
Overall, growth would increase by up to 1.2%. Compliance costs are expected to decrease (10% in compliance 
time and 2.5% in compliance costs). The cost of setting up a subsidiary would decrease by up to 67%, making it 
easier for companies (including SMEs) to go abroad. 

There  are  no  relevant  environmental  impacts  expected  from  the  preferred  option.  Social  impacts  will  also  be 
limited. 

What are the costs of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                       
The costs of the proposal in terms of national tax revenue depend on the way Member States adjust their tax 
rates to the new tax base, on the generosity of the allowance for growth investment and on the R&D incentives. 
The compliance and administrative costs of the preferred option are mostly related to the transition from existing 
corporate  systems  to  a  CCCTB.  These  costs  are  however  incurred  only  once.  There  is  no  quantitative  data 
available on the costs for tax authorities of administering a specific tax or introducing a new one. The reason is 
that most tax administrations (and the corresponding IT systems) are organised by functions and not anymore by 
type of tax. 

How will businesses, SMEs and micro-enterprises be affected? Maximum 8 lines 
For large companies which fall under the scope of the mandatory element, the common base will be compulsory. 
This  is  a  major  change  for  the  companies  and  creates  a  more  level  playing  field  within  the  EU  For  all  other 
companies,  the  CCCTB  will  offer  the  possibility  to  opt  in.  Accordingly,  for  these  companies,  there  is  no 
immediate impact if they choose to continue using the  national system. Where companies decide to apply the 
CCCTB,  they  consider  that  the  system  offers  benefits,  e.g.  in  terms  of  lower  compliance  costs  and  better 
efficiency. Consequently, the impact is positive. 

Will there be significant impacts on national budgets and administrations? Maximum 4 lines 
There are two direct effects on tax revenues. First, the CCCTB changes the rules for the computation of the tax 
base compared to national systems, reducing it for most Member States. Second, the tax base of a multinational 
group  will  be  attributed  to  Member  States  based  on  a  formula  which  measures  economic  activity  based  on 
labour, capital stock and sales. It is difficult, however, to predict the exact final changes since the revenue impact 
also depends on how the Member States will adjust the tax rates in response to the new tax base as well as on 
the behavioural answer by companies. 

Overall,  the  parallel  application  of  national  tax  systems  and  the  CCCTB  will  increase  the  burden  in  tax 
administrations since two, albeit close, taxes need to be managed. However, multinational companies will only 
file one tax declaration in the EU, easing the burden for tax administrations. Also, the administration of transfer 
pricing documentation will be greatly reduced. 

Will there be other significant impacts? Max 6 lines  
The CCCTB will make the EU more attractive for investment. Investors will not have to deal with analysing and 
evaluating  differences  and  provisions  of  28  tax  systems  when  investing  in  the  EU,  reducing  compliance  and 

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administrative costs. Also, the tax base with the incentives for R&D and an allowance for growth and investment 
will  increase  the  competitiveness  of  the  EU  since  investment  will  be  more  profitable  and  the  economy  more 
resilient. 

When will the policy be reviewed? Maximum 4 lines  
The policy will be evaluated three to five years after its implementation. Such a period seems reasonable given 
that adjustment by companies and tax administrations need time to adjust and provide the relevant data. 

D. Follow up 

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