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Common Consolidated Corporate Tax Base (CCCTB)

On 17 June 2015, the European Commission adopted an Action Plan for fair and efficient corporate taxation in the EU to reform the corporate tax framework in the EU. The aim is to tackle tax abuse, ensure sustainable revenues and support a better business environment in the Single Market.

The Action Plan has re-launched the Common Consolidated Corporate Tax Base (CCCTB), proposed by the Commission in 2011 as a holistic solution to profit shifting. The CCCTB envisages a common set of rules for computing taxable income; and the consolidation of tax bases across Member States. The aim is to reduce the complexities and compliance costs for cross-border companies. At the same time, the CCCTB would be highly effective in tackling profit shifting and corporate tax abuse in the EU, as the possibility to manipulate transfer pricing would be removed. In addition, the CCCTB would implement a common approach in the EU, defending the Single Market against aggressive tax planning from third countries.

The Fiscal Policy Analysis team of the JRC, largely based in Seville, uses a computable general equilibrium model, especially designed to investigate national and international corporate tax reforms to analyse these questions. The model, CORTAX (short for CORporate TAXation), was originally built by the Centraal Planbureau (CPB) in the Netherlands (see Bettendorf and van der Horst, 2006 and Bettendorf et al., 2009) based on the OECD Tax model built by Sorensen (2001), and was used for the impact assessment of the 2011 CCCTB reform proposal by the European Commission.

The CORTAX model describes the 27 countries of the European Union, the UK, the US, Japan and a tax haven. It features a detailed modelling of the corporate tax systems and accommodates country-specific definitions of the tax base. CORTAX offers a state-of-art modelling of profit shifting via transfer pricing and to tax havens, distinguishing between domestic firms, multinational headquarters and subsidiaries. The model provides economy-wide results for the main macroeconomic variables, such as: GDP, employment, investment and welfare.