The Dutch Senate, the Irish Dáil Éirann and the Irish Seanad Éireann have submitted reasoned opinions on the proposals for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016)683) and the Proposal for a Council Directive on a Common Corporate Tax Base (CCTB) (COM(2016)685). The Dutch Senate has also submitted a reasoned opinion on the proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (COM(2016)687).

 

Ireland

In their reasoned opinions the Irish Dáil Éirann and the Irish Seanad Éireann inform the President of the Council of the EU that they considered Proposals for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016)683) and the Proposal for a Council Directive on a Common Corporate Tax Base (CCTB) (COM(2016)685) under Article 5(3) of the Treaty on European Union and Protocol 2 on the application of the principles of subsidiarity and proportionality and that they are of the opinion that the proposal does not comply with the principle of subsidiarity.

 

 

Click here to be forwarded to the reasoned opinions on the proposals for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016)683) and the Proposal for a Council Directive on a Common Corporate Tax Base CCTB (COM(2016)685) as submitted by the Irish Dáil Éirann and the Irish Seanad Éireann on December 15, 2016 as available on EUR-Lex, which will open in a new window.

 

 

The Netherlands

On December 21, 2016 the President of the Dutch Senate sent a reasoned opinion to the President of the European Commission (Mr. J.C. Juncker), the Council of the European Union, the European Parliament and the Dutch Government. In this reasoned opinion the President of the Dutch Senate informs the addressees that under the so-called ex-ante ‘early warning’ mechanism the Dutch Senate has issued yellows card for the proposal for a (Common Consolidated Corporate Tax Base – CCCTB) (COM(2016)683), the proposal for a (Common Corporate Tax Base – CCTB) (COM(2016)685) and the proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (COM(2016)687).

 

The issuance of a yellow card is a competence of the national parliaments of the Member States. Any national parliament or any chamber of a national parliament has eight weeks from the date of forwarding of a draft legislative act to send to the Presidents of the European Parliament, the Council and the European Commission a reasoned opinion stating why it considers that the draft in question does not comply with the principle of subsidiarity. If at least one-third of all parliaments in the EU give a yellow card, the European Commission has to either reconsider (maintain or amend) or withdraw the respective proposal.

 

Below we will provide an unofficial translation of the reasoned opinion as sent by the Dutch Senate on December 21, 2016.

 

To the President of the European Commission, Mr. J.C. Juncker

 

The Hague, December 21, 2016

 

The Eerste Kamer der Staten-Generaal (The Dutch Senate) has considered, in accordance with the established procedure, whether the below mentioned proposal comply with the principle of subsidiarity:

·   Proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016)683);

·   Proposal for a Council Directive on a Common Corporate Tax Base (CCTB) (COM(2016)685);

·   Proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (COM(2016)687).

 

Therewith Article 5 TEU and Protocol 2 of the Lisbon Treaty have been applied regarding the application of the principles of subsidiarity and proportionality.

 

Via this letter I inform you regarding the opinion of the Dutch Senate. Identical letters have been sent to the European Parliament, the Council and the Dutch Government.

 

A majority of the Dutch Senate is of the opinion that the proposals for a Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016)683), for a Council Directive on a Common Corporate Tax Base (CCTB) (COM(2016)685) and for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (COM(2016)687) do not comply with the principle of subsidiarity.

 

The fractions that came to this judgment by majority motivate their views on the subsidiarity and proportionality of the proposals in question as follows:

 

Common Consolidated Tax Base – CCCTB (COM(2016)683)

The proposal for a Directive that is a predecessor of the two proposals for Council Directives regarding the Common (Consolidated) Corporate Tax Base now in question was criticized by the Dutch Government during its review in 2011. That review then led to a negative judgment on the principle of subsidiarity. The proposals in question deserve further consideration during the further legislative process. The issues are extensive and the consequences for the Treasury are not sufficiently clear. A majority of the Senate follows the negative opinion on the principle of subsidiarity as expressed by the Dutch Government. The opinion of the Dutch Government reads as follows:

 

«The cabinet assesses the subsidiarity negative. The cabinet does not recognize the need to come to a consolidation and a reallocation of profits at a European level. Within the OECD already arrangements have been made regarding mutual transfer prices – differing from this allocation key – used for the international allocation of profits.»

 

Furthermore, based on the following grounds, a majority of the Senate is of the opinion that proposal does not comply with the principle of subsidiarity:

·   There is no reason to require a consolidation of profits realized within the EU for companies with a revenue exceeding Euro 750 million;

·   There are no proven benefits for the internal market, within the OECD already arrangements have been made regarding mutual transfer prices;

·   The impact-assessment of the European Commission is based on unrealistic assumptions (namely that 16 countries, including The Netherlands, will increase their corporate income tax rates);

·   The risk is too big that this will ultimately lead to less corporate income tax revenues in The Netherlands;

·   It is hard to find a relation with combating tax avoidance;

·   The proposal does not contain a minimum rate of for example 20% for corporate income tax.

 

Furthermore a majority of the Senate is of the opinion that for the following grounds the proposal does not comply with the principle of proportionality:

·   The proposal is too complex and leads to a complicated implementation (3 systems will exist parallel to each other);

·   The allocation key will work-out badly for trading and servicing countries like the Netherlands (revenue, fixed assets, a combination of wages and the number of employees);

·   Arrangements regarding mutual transfer prices have already been made within the OECD.

 

Common Corporate Tax Base – CCTB (COM(2016)685)

A majority of the Senate follows the negative opinion on the principle of subsidiarity as expressed by the Dutch Government that reads as follows:

«The cabinet assesses the subsidiarity negative. The cabinet does agree with the objectives this proposal aims for – strengthening of the internal market and of the business environment within the EU and combating tax avoidance. The proposals do however not contribute anything or barely contribute anything to this objective.

 

The Commission indicates that it is only possible to come to a common corporate tax base at an EU level to strengthen the internal market. In the opinion of the cabinet the proposals do not show that a European solution has additional value for all actors involved in the issue. Having a partially optional system means that the government has to use two different tax systems regarding corporate income tax instead of one system, which has obvious disadvantages for implementation effectiveness. Furthermore the Anti Tax Avoidance Directive (ATAD) that was adopted under the Dutch EU Presidency has already led to a large harmonization of the tax base within the Member States with the purpose to combat tax avoidance. Measures to combat tax avoidance similar to those included in the ATAD do return in the proposal for a CCTB. The other measures included in the proposal for a CCTB do not contribute anything, or do only barely contribute to the objective of combating tax avoidance. It is therefore questionable if and to what extent this proposal provides additional measure to combat abuse.»

 

A majority of the Senate has the following additional grounds based on which it is of the opinion that the proposal does not comply with the principle of subsidiarity:

·   The objectives of strengthening the business environment and tax avoidance will not be met; (ITP: We assume the Dutch Senate meant to state "combating tax avoidance" instead of "tax avoidance")

·   The EU ATAD Directive will already lead to the desired harmonization of corporate tax bases (largely implementation partly BEPS-package);

·   The proposal will corrode the Dutch concept of taxable profits, limit the participation exemption and will terminate the innovation box;

·   The proposal unnecessary goes beyond the OECD (BEPS)-package.

 

Based on the following grounds the majority of the Senate is of the opinion that the proposal does not comply with the principle of proportionality:

·   The proposal is far too complex and leads to a complicated implementation (three systems will exist parallel to each other);

·   The limited and temporary possibility of loss transfer could lead to an artificial import of losses from other EU Member States.

 

Proposal for a Directive on hybrid mismatches with third countries (COM(2016)687)

The main objective of the Proposal for a Directive on hybrid mismatches with third countries is to combat aggressive tax avoidance. The Directive might however also affect structures that are important for employment in the Netherlands. Furthermore it might also affect the attractiveness of the Netherlands as country of establishment, especially for American companies. A majority of the Senate is of the opinion that the proposal does not comply with the principle of subsidiarity and mentions the following specific grounds in this respect:

·   The proposal constitutes a deterioration of the Dutch system of levying of taxes;

·   The proposal goes beyond what the OECD has intended;

·   The proposal will lead to taxation (or non-deductibility), while the value is added in a third country. Where it is this third country where the levying of taxes should take place. That is a competitive disadvantage for non-EU companies that would like to operate in the internal market.

 

Finally, based on the following grounds, a majority of the Senate is of the opinion that the proposal does not comply with the principle of proportionality:

·   A global approach is preferred (Action 2 of the BEPS Action Plan);

·   The proposal is bad for the Netherlands (especially with respect to investments made by American companies and the related employment opportunities);

·   It is better to wait for the tax policy of the new U.S. Government. It is very well possible that in the future hybrids will be less attractive from a U.S. point of view.

 

Based on the grounds mentioned above the Senate in majority comes to the conclusion that the proposals for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016)683), for a Council Directive on a Common Corporate Tax Base (CCTB) (COM(2016)685) and for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (COM(2016)687) do not comply with the principles of subsidiarity and proportionality.

 

The President of the Eerste Kamer der Staten-Generaal,

 

A. Broekers-Knol

 

Click here to be forwarded to the reasoned opinion (in Dutch) as published on the website of the Dutch Government, which will open in a new window.

 

 

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