Fair and simpler taxation supporting the recovery strategy - Ways to lower compliance costs and improve EU corporate income taxation

Študija 21-09-2021

This study analyses the gaps and challenges in the EU corporate income tax (CIT) legislation, and evaluate the European Added Value (EAV) of potential policy options to address these challenges. A thorough comparative economic analysis is made of the EAV of a series of scenarios, based upon the policy options identified. The results confirm that complexity remains by far the greatest factor behind both the CIT gap and the high level of compliance costs for businesses. Insufficient transparency, lack of administrative effectiveness and lack of efficient enforcement are also of particular relevance for businesses as they have a relatively large impact on compliance costs. As expected, the move towards digitalisation of the tax administration also appears as an option to reduce both the CIT gap and compliance costs in all scenarios, but probably to a lesser extent than what is sometimes assumed. The study finds an EAV of around €30 billion for a scenario of agreement in the G7/OECD plus limited implementation of the Commission's 'Business in Europe: Framework for income taxation' (BEFIT) proposals, as well as reinforced and extended cooperation. A slightly higher EAV of around €45 billion is found for a scenario of G7/OECD agreement + ambitious BEFIT and reinforced cooperation. Finally, a higher EAV of €76 billion is found with the most ambitious scenario of an EU treasury, qualified voting majority (QVM) in Council and CIT administered at EU level. The most ambitious scenario is however still rather unlikely to gather sufficient support at the current juncture as it would require substantial Treaty changes. It can be concluded that the two other alternatives are more likely to be implemented in the coming period.