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Opposition to the CCCTB

The CCCTB is potentially disadvantageous for Ireland and other Member States with small,
open economies. Particularly due to the use of sales in the apportionment formula that would be
used to calculate a companys consolidated tax base. In Member States where multinational
companies produce products for export, such a formula would reduce the amount of income
available for taxation.

Research published by the ESRI in December 2016 estimated that the CCCTB would reduce
overall FDI flows to Ireland by 4.6% and reduce the countrys corporation tax revenues by 5.7%.
Total FDI flows into the EU would fall 1.1%, while corporation tax revenues for the EU as a
whole would increase by a mere 0.2%.

CCCTB and the implications of Brexit

As a customs union, there are no customs duties within the EUs territory, and Member States
share common external tariffs with third countries. As a single market, it shares a VAT system
that is harmonized and charged on a consistent and integrated basis across the whole of its
territory. VAT funds a part of its budget and is paid by its hundreds of millions of citizens. The
position is different for corporate income taxes. The EU treaties do not require or even
contemplate their harmonization.

However, in recent years an activist Court of Justice of the European Union (CJEU) and an
increasingly proactive Commission have significantly restricted Member States freedom within
the tax area through proceedings for state aid, for discrimination and for restrictions of the
fundamental freedoms. Therefore, while corporate income taxes may not be harmonized in the
way that VAT and customs duties are, membership of the EU has nevertheless had a
fundamental effect on parts of the UKs tax code, such as the controlled foreign companies,
transfer pricing and corporate distribution rules.

Not all Member of European Union support Common Consolidated Corporate Tax Base and
perhaps the most vocal opponent is the UK. However, recognition amongst Member States
and their electorates of the need for co-operation in the international tax arena to eliminate
perceived unfair advantages for multinational groups means that it is now more likely than at
any time previously that some of these ideas will gain traction. This paper explores how a Brexit
might impact each of these areas customs duties, value added tax and corporate income

The vote in favor of leaving the EU could have implications for direct and indirect tax in the UK
after secession.


In the short term, the vote in favor of leaving the EU will have little, if any, immediate impact on
indirect or direct taxes. Few changes are likely to occur while the secession negotiations take
place. The potential future relationship between the UK and the EU is unclear. A close
association is likely to have less impact on many tax issues, but a more remote link will have a
greater impact.

Key Findings

The paper analyses the direct and indirect tax implications for the possible alternatives to
membership of the EU:

For indirect tax, there is likely to be a significant impact on Customs Duty and VAT,
where the UK would need its own taxation systems. Transactions to/from other EU
states would become imports and exports with potential impacts on systems and cash
flow. Other indirect taxes would be largely unaffected

For direct tax, relevant EU law; what could change if the UK left the EU; State Aid rules
and Harmful Tax Practices.

Customs Union

It seems highly likely that if the UK were to leave the EU, it would also cease to be a part of the
customs union. One of the main benefits for the UK of Brexit is thought to be the ability to
negotiate free trade agreements with the likes of the Commonwealth or NAFTA.
Value Added Tax

The EU is about free trade. VAT has therefore been harmonized within the EU since 1977.
Following Brexit, the UK would sit outside of the territorial scope of EU VAT. It would therefore
be open to the UK to change how VAT is charged in the UK, or even to replace it with an entirely
different tax.

Future of Corporate Income Tax within the EU

The EU is at a crossroads now in terms of where it will go with corporate income taxes. The
Commission is pushing hard for full harmonization by introducing the CCCTB. Adoption of the
CCCTB across the whole EU requires unanimous consent. It is difficult to know how much real
support for the CCCTB there is among Member States, but UK is a particularly vocal opponent.