The European Common Consolidated Tax Base vs the tax gap
Posted by Christie Malry on May 12, 2011 at 10:02 am
Ritchie writes today about tax simplification, in which he says:
... if tax is not an impediment ... but minimising compliance cost and maximising tax recovery to minimise the tax ga[p] so that the tax rate can be kept as low as possible for those honest companies who seek to comply with their obligations is a priority then of course one system that saves admin cost and eliminates transfer pricing problems is a massive boost to efficiency.
He is muddling up his concepts here. Because CCCTB, the quasi Soviet acronym used for the Common Tax Base, is nothing to do with the tax gap. So it won't, indeed can't, impact the tax gap.
You can tell this by looking at the draft directive on CCCTB. This is full of differences between local accounting, most of which will be IFRS based, and the way CCCTB will operate. So a company that behaves itself and follows the tax law to the letter will still have deferred tax in relation to items that are taxed at a different time to the way they're recognised in the accounts.
There will also continue to be reconciling items in the note to the accounts which shows how the notional tax on the accounting profits at the local statutory is related to the actual total tax charge. This is because countries will continue to set their own tax rates, which may be more or less than the home country rate.
And companies that operate outside the EU will still face transfer pricing issues in relation to that business. So the Vodafones and Barclays of this world will still have to remove smelly, ignorant UKuncut protestors from their high street stores. It's no wonder that UK business is totally underwhelmed by CCCTB.
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