On Tuesday, 18 May, the European Commission published its Communication “Business Taxation for the 21st Century”. The document sets out the Commission’s vision for EU corporate tax policy leveraging off the OECD’s BEPS 2.0 project. The Communication also makes tax policy proposals going beyond the issues currently under review at OECD level. These proposals include mandatory publication of effective tax rates paid by large companies, rules to counter the misuse of shell entities for tax purposes, recommendation on the domestic treatment of losses, tax rules to encourage equity investment over debt and a common tax rulebook to determine the allocation of taxing rights between Member States called the Business in Europe: Framework for Income Taxation (BEFIT).

The Commission plans to issue two Directives which will implement the two Pillars under BEPS 2.0 and cover interactions with the EU’s Anti-Tax Avoidance Directive (ATAD). The Directives will also address interactions with the EU’s proposed recast of the Interest and Royalties Directive, and the EU’s list of non-cooperative jurisdictions for tax purposes.

The Communication resurrects the Commissions long-held goal to introduce a common corporate tax system within the EU in the guise of a new framework for income taxation for businesses in Europe called BEFIT. The Commission will put forward its proposals for BEFIT by 2023. BEFIT proposes common rules for determining the corporate tax base and for the allocation of profits between Member States based on a pre-defined formula and will be compatible with BEPS 2.0 outcomes.

Ireland is among several EU states who oppose measures promoted by the European Commission which erode the tax sovereignty of Member States.