According to a study by the U.K. based Tax Justice Network, the implementation of the Common Consolidated Corporate Tax Base (CCCTB) by the European Commission would devastate the tax base of many small EU member states. Countries such as Malta, Slovenia, and Estonia could see their tax base shrink by more than half due to the formulary apportionment in the CCCTB. On the other hand, larger member states such as Germany, Spain, and Italy are expected to benefit greatly from the new proposal.


Proponents of the CCCTB argue that it will cut red tape for firms by providing a single EU system for taxes, thus eliminating the need to file corporate tax in each state that business is conducted in. However, the ability to control tax rates is a key part of state sovereignty. Whether low-tax or high-tax, member states should maintain the right to control their tax rates and enforce their tax codes as they see fit, without the interference of the European Commission.


Further, EU attempts to harmonize the corporate tax system into a common, cross-union system violates the subsidiarity principle of the EU. Defined in Article 5 of the Treaty on the European Union, subsidiarity aims to ensure that decisions are taken as closely as possible to the citizen. The Union is only justified to take action in matters where the objectives of the action cannot be accomplished by member states. In terms of the CCCTB, the taxation of corporations is best left to each member states to accomplish its tax objectives as it sees fit.


As larger member states continue to push the CCCTB, they miss the key issue at hand. Instead of proposing the CCCTB that will harm smaller member states, larger states can reform their own tax systems. The purpose of the CCCTB is to “level the playing field” according to the European Commission. This can be done through states undertaking tax reform that lowers their corporate tax rates, making them more competitive against smaller states such as Malta. The EU should be focused on encouraging its members to undertake pro-growth tax reform, not robbing its members of their sovereignty in order to compensate for high-tax states.