A Fair EU Tax: revaluing the EUCIT idea and exploring its overall potential implications Dr. Luca Cerioni E-mail: luca.cerioni@ed.ac.uk, lcerioni6@gmail.com Fair Tax Conference: Options for an EU Tax as an EU Own Resource Vienna, 19th September 2016

Criteria for assessment in a European Commission’s working paper (Tax-based EU own resources: an assessment, 2004) Budgetary criteria (sufficiency; stability) Efficiency (visibility; low operating cost; efficient allocation of resources) Equity criteria (horizontal equity; vertical equity)

Equity: the allocation of taxing rights The EU legal order contributes to the generation of profits of businesses using the fundamental freedoms guaranteed by the Treaty on the Functioning of the European Union (TFEU) EUCIT should thus replace national corporate income tax only for companies using the fundamental freedoms (and thus benefiting from the EU legal order) EUCIT revenues should be partly allocated to EU budget, and partly redistributed to Member States

Equity: vertical (and horizontal) equity - Uniform rules on the tax base and on the tax rate - Companies falling within the scope of EUCIT should be regarded as taxpayers with their own ability-to-pay - A reduced rate for SMEs would be consistent with the SBA (Small Business Act) and with the composition of business structures within the EU (99% SMEs) Incentive for a greater number of SMEs to use the fundamental freedoms; positive impact on EUCIT revenues and on its contribution to the EU budget

Neutrality EUCIT should be designed in such a way as not to adversely affect business and investments decisions, and not to allow scope for tax planning based on the legal form of businesses The scope of EUCIT should include all businesses using fundamental freedoms, even if they are classified as “tax transparent” for the purpose of domestic tax law There would be a limited implication for Member States’ tax systems

Certainty An increase of certainty both for taxpayers and for tax authorities of Member States, would be possible in case of multilateral and instaneos sharing of information between national tax authorities The current double tax conventions based framework, which has been leaving scope for different national applications and interpretation, should be replaced The “one-stop-shop” model, which was proposed for the CCCTB project, should be used for the administration of EUCIT too

Convenience A supranational (EU) tax office, composed of permanent representatives of each national tax administration, could be set up and could work as a single “European One-Stop-Shop” (EOSS) for all businesses falling within the scope of EUCIT All EUCIT related reporting and payment obligations would be met only through the EOSS (simplification of tax compliance) Irrelevance of national tax residence; “EU tax resident” status for all businesses subject to EUCIT

Fair application from Member States’ perspectives The application of EUCIT through the EOSS regime would protect Member States’ revenues against the risk of tax residence transfer to lower-tax jurisdictions The European Tax Identification Number and the “tax web portal” (envisaged by the European Commission) would be important tools to minimize operational costs of a EOSS regime The EOSS would retain part of the EUCIT revenues for the EU budget, and would redistribute another part to Member States on a pro-quota bases

Possibility of borrowing the idea for individuals The relation between corporate taxes and personal income taxes, and the application of EU fundamental freedoms to both companies and individuals, could trigger wider implications in the event of introduction of EUCIT The scheme could be “borrowed” for individuals using the fundamental freedoms and earning incomes in at least two Member States A European Union Personal Income Tax (EUPIT) could thus be conceived along the same lines as EUCIT

Conclusions EUCIT would offer EU budget an additional resource The inclusion within its scope of all businesses which exercise the fundamental freedoms, together with a reduced rate for SMEs, could be expected to meet all criteria (including the budgetary criteria), that were highlighted by the Commission, to a higher extent than previous versions of EUCIT The potential for triggering the introduction of an EUPIT could end up generating a further contribution to a greater EU fiscal autonomy

Thank you very much for attention All questions are welcome