Last Thursday, the Institute, under the auspices of the CCAB-I, responded to the European Commission’s public consultation on the BEFIT initiative.
BEFIT is an initiative which sets out to introduce a common set of rules for EU companies to calculate their taxable base to ensure a more effective allocation of profits between EU countries.
In our response we outline that BEFIT is not the direction that the EU should be focusing on given the OECD’s ongoing work on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy and the subsequent EU directive to implement the OECD’s Two Pillar Solution.
The main points from the CCAB-I response are summarised as follows:
- The OECD Two-Pillar Solution is a landmark in international cooperation in taxation matters. This initiative has yet to be fully agreed, and until the rules are fully implemented and given time to mature, it is premature to consider a suite of measures which would apply to SMEs who predominantly operate within their national boundaries.
- CCAB-I is in favour of a move toward a territorial system of taxation which would benefit SMEs and enhance intra-EU trade in a proportionate way consistent with the principles of subsidiarity and sovereignty.
- CCAB-I considers that direct taxation should remain the responsibility of national legislators and this we believe to be consistent with the principles of sovereignty and subsidiarity.
- The current BEFIT proposals suggest that dual tax systems would operate in EU countries, and it is questionable whether administrative efficiencies could be achieved from such dual system.
- CCAB-I’s view is to allow the Pillar One and Pillar Two processes to conclude before consideration of implementing a further set of complex rules, which clearly have some overlap.