Answer given by Mr Moscovici on behalf of the Commission

3.8.2016

Corporate taxation is based on a simple principle: that profits, that is the difference between the income and the expenses linked to that income, obtained by a corporate taxpayer should be taxed. In addition, in principle only real income and not the mere expectation of it, should, be subject to tax. A fair tax system requires that the tax authorities are able to tax all the profits obtained within their jurisdiction. However, designing a tax system lies within the competence of the Member States. The Commission's role is to protect the tax base generated in the EU. It is in this context that the expression ‘tax is payable, where profits are generated’ can be understood.

Accordingly, a general corporate tax system should focus on the real economic activities carried on in its jurisdiction. Each activity must be taxed in relation to the profits realised. In particular, it should be noted that the Commission's proposal for a Common Consolidated Corporate Tax Base of 2011, which will be relaunched by the end of 2016, includes a formula apportionment method based on three different factors (namely labour, assets and sales). This gives appropriate weight to the interests of all the Members States involved and reflects well the value created by the different actors.