The effects of the proposed Common Consolidated Corporate Tax Base (CCCTB) on (small) European Union member states with special reference to its effects on Maltese Income Tax Legislation

Abstract

This paper is a commentary on recent developments in the EU, where the European Parliament and the Commission are attempting to push for tax harmonisation between Member States. The paper tackles the proposal for a Common Consolidated Corporate Tax Base (CCCTB), which is a set of regulations aimed at establishing common rules for the taxing of certain multinationals operating across the European Single Market. Several references are made to European and Maltese principles of legislation. The first chapter defines the proposed CCCTB directive analysing its aims, scope and mechanics. Reference is made to the failed original proposal for tax harmonisation, made in 2011, and to the Common Corporate Tax Base (CCTB) directive which is also under consideration. The formula by virtue of which tax will be apportioned between Member States is also discussed. In the second chapter particular attention is given to the effects that the introduction of the CCCTB will have on the current framework of Maltese income tax legislation and on the Maltese economy in general. Reference is made to the position taken by the Maltese authorities to argue against the possible introduction of this directive. In the third chapter, there is an analysis of how some of the smaller EU nations have reacted to the directive both from a legal and economic perspective. Together, chapters two and three illustrate how the key principles of sovereignty, subsidiarity, proportionality and unanimity voting are important considerations when it comes to tax matters. Opinions collected during interviews with a number of people concerned with this directive in Malta, from the political, private and public sectors, are presented throughout this dissertation to supplement the research conducted. The final chapter gathers concluding remarks on the subject, considers the uncertain future facing the implementation of the CCCTB as currently drafted and questions whether further discussions could result in a modified CCCTB that would find the support across the EU Council where unanimity is required on tax related matters.