The Principle of Territoriality and its Implementation in the Proposal for a Council Directive on a Common Consolidation Corporate Tax Base (CCCTB)

Abstract

This paper was completed on 28 March 2012 and is based on the author’s lecture on 7 October 2011 at the University of Florida.The EU Commission put forward its proposal for a Directive for a Common Consolidated Corporate Tax Base ("CCCTB") with some delay after long preliminary work. That proposal provides for a uniform corporate tax base that may be relied upon in all EU Member States. Its underlying objective is to reduce the administrative burden for companies. A group that is subject to the CCCTB rules will no longer have to determine transfer prices. The concept therefore also assumes a consolidated tax base. The CCCTB system is optional and not intended to replace the set of corporate tax rules of the Member States. Businesses operating in several Member States will no longer inevitably encounter different corporate tax systems but will, according to the Proposal of the European Commission, be able to opt for one uniform tax base throughout the European Union. Still, the proposal provides only for a harmonization of tax bases, as each Member State will be applying its own rates to its share of the taxpayer’s tax base. Tax competition will be maintained but will experience a higher degree of regulation and transparency.