THE EU AND TAX AVOIDANCE BY

MULTINATIONAL CORPORATIONS
A MULTIPLE STREAMS ANALYSIS OF THE PROPOSAL FOR A
COMMON CONSOLIDATED CORPORATE TAX BASE (CCCTB)
Wetenschappelijke verhandeling

Aantal woorden: 26.972

Stefan Vandenhende
Stamnummer: 00706891

Promotor: Prof. dr. Dries Lesage

Copromotor: Wouter Lips

Masterproef voorgelegd voor het behalen van de graad master in de richting Politieke Wetenschappen
afstudeerrichting Internationale Politiek

Academiejaar: 2016 - 2017

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 I. SOME WORDS OF GRATITUDE
This long overdue thesis would not have happened without the support of a bunch of very nice people, who I
would like to thank.

Thank you to my promotor Dries Lesage and copromotor Wouter Lips. Their ideas, comments and feedback
were very valuable.

Thank you to my family: my parents Jan Vandenhende, Katrien Vanheuverbeke and sisters Liesa and Laura,
who have supported me throughout many years and trials. A very special thanks to my grand-/godmother
Sabine Vandemeulebroucke. A special thanks to my partner Katrien Devroe for the mental support and
feedback, regular much needed nudging and focus, but also distractions.

A last thank you to all my friends who have in many ways supported me throughout the last years and who
never stopped making fun of me for not yet finishing my MA, I promise my driver’s license is next. Special h/t
to Zotero-wizard Davy Verbeke and language-experts Phillip Jorgensen and Ashton Kelly.

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II. ABSTRACT (NEDERLANDS)
Sinds LuxLeaks, de eerste van een reeks grote belastingsschandalen, krijgt grootschalige belastingontwijking
door multinationale bedrijven veel aandacht. Aangestuurd door de media, publieke aandacht en actievoerders,
hebben de EU en haar lidstaten geprobeerd dit probleem aan te pakken via verschillende beleidsvoorstellen.
Een belangrijk voorstel in deze is de gemeenschappelijke geconsolideerde heffingsgrondslag voor de
vennootschapsbelasting (CCCTB), geïntroduceerd door de Europese Commissie in oktober 2016. Het voorstel
is een herlancering van een voorstel van 2011, dat toen gestrand is omwille van een gebrek aan consensus
binnen de ECOFIN-Raad. Het herwerkte voorstel formuleert een aantal opmerkelijke veranderingen en
positioneert zich als een sterke maatregel tegen belastingontwijking. Doel is om het huidig belastingstelsel van
de EU, dat de standaard van de absolute zelfstandigheidsfictie of ‘separate entity approach‘ volgt, om te
vormen naar een meer unitaire belastingheffing of ‘unitary taxation‘, die multinationals beschouwt als één
entiteit.

Aan de hand van een stromenmodel (‘multiple streams’ analyse) worden de beleidsprocessen van beide
voorstellen geduid. Als eerste wordt het voorstel van 2011 geanalyseerd. Het voorstel is ontstaan omdat de
Commissie de nationale belastingstelsels wou harmoniseren en aan bedrijven een goed functionerende
interne markt zonder enige belemmering wou bieden. Door een sterke tegenkanting vanuit de lidstaten
bereikte men uiteindelijk geen consensus. Het derde hoofdstuk analyseert het voorstel van 2016. De
Commissie reageerde met haar vernieuwde voorstel op de toenemende bezorgdheid over
vennootschapsbelastingontwijking en een groeiende financiële ongelijkheid. Als laatste worden aan de hand
van het stromenmodel de twee voorstellen vergeleken en worden de slaagkansen van het voorstel van 2016
ingeschat. Hoewel het laatste voorstel een betere versie is dan de vorige, lijkt het echter nog steeds
onwaarschijnlijk dat de de facto coalitie tussen de Commissie, actievoerders en het Europees Parlement, de
Raad kunnen overtuigen om het voorstel goed te keuren.

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III. ABSTRACT (ENGLISH)
Large-scale tax avoidance by multinational corporations has received enormous attention since LuxLeaks, the
first of a series of big tax scandals. Urged on by media, public attention and tax justice campaigners, the EU
and its Member States have been trying to tackle this problem through different policy proposals. One principal
effort is the European Commission’s October 2016 proposal for a Common Consolidated Corporate Tax Base
(CCCTB). The proposal is a re-launch of a 2011 proposal on which the ECOFIN Council did not manage to
reach a consensus, but with some remarkable changes and a significant rebranding as an anti-tax avoidance
measure. The proposal would move the EU’s tax system away from the current standard separate entity
approach, to one of unitary taxation, which treats MNCs as one single entity during taxation.

This thesis uses a multiple streams framework to explain the policy processes of these proposals. First, the
framework is applied to the 2011 proposal, which was driven by the Commission’s desire to harmonise national
tax systems and provide businesses with a well-functioning single market without tax obstacles. No consensus
was reached because of the staunch opposition of several Member States. Secondly, this thesis explains how
the Commission re-launched the CCCTB in 2016, rebranding it as a response to growing concerns over
corporate tax avoidance and increasing financial inequality. Finally, the MSF’s structure is used to compare
the two proposals and come to an assessment of the 2016 CCCTB’s chances. While it is a noticeable
improvement, it still seems unlikely that the de-facto coalition of the Commission, tax justice campaigners and
the European Parliament will be able to drive the Council to reach a consensus.

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IV. LIST OF ABBREVIATIONS
ATAD 1: Anti-Tax Avoidance Directive 1, formally Council Directive (EU) 2016/1164

ATAD 2: An amendment to ATAD I, formally Council Directive (EU) 2017/952

BEPS: Base erosion and profit shifting

CbCR: Country-by-Country Reporting

CCCTB: Common Consolidated Corporate Tax Base

CCTB: Common Corporate Tax Base

CFC: Controlled foreign company

Commission: European Commission

DTT: Double tax treaties

ECOFIN: Economic and Financial Affairs Council configuration of the EU Council of Ministers, below
also referred to as simply ‘the Council’

EP: European Parliament

FSI: Financial Secrecy Index

ICIJ: International Consortium of Investigative Journalists

LoN: League of Nations

MNC: Multinational Corporation

OECD: Organisation for Economic Co-operation and Development

TJN: Tax Justice Network

UN: United Nations

UT: Unitary Taxation

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V. TABLE OF CONTENT
I. Some words of gratitude ............................................................................................................................ 3

II. Abstract (Nederlands) ................................................................................................................................ 4

III. Abstract (English) ................................................................................................................................... 5

IV. List of abbreviations ............................................................................................................................... 6

V. Table of Content ......................................................................................................................................... 7

1 Introduction .............................................................................................................................................. 10

1.1 Research questions .......................................................................................................................... 11

1.2 Central concepts and literature review ............................................................................................. 11

1.2.1 Multinational corporations in the globalised economy .............................................................. 11

1.2.2 Tax avoidance ........................................................................................................................... 12

1.2.3 The international tax system: a complex and uncoordinated network of bilateral tax treaties . 13

1.2.4 How corporate tax avoidance works: the main techniques ...................................................... 14

1.2.5 How corporate tax avoidance works: tax havens ..................................................................... 15

1.2.6 Evidence of tax avoidance by MNCs ........................................................................................ 16

1.2.7 The impact of tax avoidance ..................................................................................................... 17

1.2.8 Tackling tax avoidance by MNCs ............................................................................................. 18

1.2.9 Corporate taxation at the EU level: a slow path to tax harmonisation ...................................... 21

1.3 Theoretical Framework and Methodology ........................................................................................ 22

1.3.1 A Multiple Stream Framework to study the EU policy process ................................................. 23

1.3.2 Methodology and sources ......................................................................................................... 26

1.3.3 Limitations of this study............................................................................................................. 28

2 The 2011 CCCTB’s policy process .......................................................................................................... 29

2.1 Problem stream ................................................................................................................................ 29

2.1.1 Tax obstacles for businesses prevent the well-functioning of the Single Market ..................... 29

2.1.2 Harmful tax competition between Member States as a barrier for the well-functioning of the
Single Market ........................................................................................................................................... 30

2.2 Policy stream .................................................................................................................................... 30

2.2.1 The 2011 CCCTB Proposal ...................................................................................................... 32

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 2.3 Politics stream .................................................................................................................................. 33

2.4 Reactions to the 2011 CCCTB proposal and aftermath ................................................................... 34

2.4.1 European Parliament’s support for the CCCTB proposal ......................................................... 34

2.4.2 National Parliaments and Member States ................................................................................ 35

2.4.3 Council discussions on the CCCTB .......................................................................................... 36

3 The 2016 CCCTB’s policy process .......................................................................................................... 37

3.1 Problem stream ................................................................................................................................ 37

3.1.1 Inequality and corporate tax avoidance .................................................................................... 37

3.1.2 Tax scandals ............................................................................................................................. 38

3.2 Policy stream .................................................................................................................................... 39

3.2.1 The 2016 CCCTB Proposal ...................................................................................................... 40

3.3 Politics stream .................................................................................................................................. 41

3.3.1 A European mood favouring taxation reforms .......................................................................... 41

3.3.2 The key role of tax justice campaigners and media ................................................................. 42

3.3.3 The European Parliament as a political ally of the CCCTB ...................................................... 43

3.3.4 The Council in the backseat ..................................................................................................... 44

4 Assessment of the chances of the 2016 CCCTB Proposal ..................................................................... 45

4.1 Problem stream: tax scandals as a trigger ....................................................................................... 45

4.2 Policy stream: new features increasing the CCCTB’s chances ....................................................... 45

4.3 Politics stream: is the time right for a CCCTB? ................................................................................ 47

4.3.1 Public CbCR as an indication ................................................................................................... 47

4.3.2 How will the EP react? .............................................................................................................. 48

4.3.3 Stakeholders’ reactions............................................................................................................. 48

4.3.4 Key Member States in the Council ........................................................................................... 49

4.3.5 Where does the CCCTB go next? ............................................................................................ 51

5 Conclusion ............................................................................................................................................... 53

6 References ............................................................................................................................................... 55

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9
1 INTRODUCTION
LuxLeaks, PanamaPapers, SwissLeaks and BahamaLeaks, a number of recent tax scandals have highlighted
the problem of tax avoidance by well-known Multinational Corporations (MNCs). Often stemming from leaks
by whistle-blowers, tax scandals like LuxLeaks have highlighted how MNCs are able to exploit loopholes in
the tax system to legally lower their taxes to effectives rates that are often close to 0% (International
Consortium of Investigative Journalists, 2014). These scandals have also brought to attention the role the EU
and many of its Member States play in allowing, or even actively supporting, tax avoidance. In response to
this public pressure, the European Commission has been launching a number of proposals to reform corporate
taxation in the EU.

On 25th of October 2016, the Commission proposed a Corporate Tax Reform Package of which the central
part was a re-launch of the Common Consolidated Corporate Tax Base (CCCTB). The CCCTB proposal is
one of five key areas for action in the EC’s ‘Action Plan on Corporate Taxation’, launched in the aftermath of
LuxLeaks in June 2015 (European Commission, 2015b). Two particular features of this proposal set it apart
from other corporate tax-related proposals which the Commission has made recently.

Firstly, the CCCTB would move the EU away from the core principles of the current international corporate tax
system. The current international – and thus European – tax system treats MNCs as “loose collections of
separate entities operating in different countries. (Picciotto, 2012, p.3)”. This ‘separate entity’ approach gives
MNCs significant room for aggressive tax planning, allowing MNCs to easily move profits to countries with
lower tax rates and thus avoid taxes. If the CCCTB is implemented, it would effectively move the EU towards
a system of unitary taxation. Unitary taxation treats every MNC as one single entity during taxation and uses
their consolidated accounts as the basis for calculating their taxable profits. A standard formula (in the CCCTB
based on assets, personnel and sales) is then used to apportion a part of the tax base to each country where
the MNC is active. The CCCTB, if implemented, would be ground-breaking for the EU, as it would move away
from the current principles of the international tax system and make it much more difficult for MNCs to avoid
taxes within the EU (Picciotto, 2012).

Secondly, this is a re-launch of a 2011 proposal by Commission to introduce the CCCTB in the EU. That first
proposal “got stuck in negotiations (Eurodad, 2016, p.25)” because several EU Member States, who have to
unanimously agree on taxation-related matters, disagreed strongly (Garside, 2016; Stearns, 2016). The
Commission is now re-launching the proposal with some changes, which shall be discussed below, but the
core remains the same: a move towards unitary taxation. It will also again be the Economic and Financial
Affairs Council (Ecofin Council) and thus the Member States, who will decide on the new CCCTB proposal.

This renewed proposal gives an attractive case of EU agenda-setting and policy formation. Hence, this thesis
has two aims: to understand the political process that has led to the re-launch of the CCCTB and to assess its
chances of success.

To understand why the CCCTB is back on the Council’s table, is to study agenda-setting and decision-making.
As this study concerns a multi-layered proposal and the complex institutional setting of the EU, an adequate
theoretical framework for this study is required. The multiple streams framework (MSF) shows particular

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promise in this aspect as it “takes into account what are normally considered to be pathologies of the EU
system, such as institutional fluidity, jurisdictional overlap, endemic political conflict, policy entrepreneurship
and varying time cycles (Ackrill, Kay & Zahariadis, 2013)”. The MSF provides a lens to help us understand
why the CCCTB is now on the table again, while it can also be the framework for a comparison between the
2011 and 2016 proposals, providing some insights into the feasibility of the 2016 CCCTB.

The following parts of this introduction will further explore these two research questions, clarify the main
relevant concepts of tax avoidance and the CCCTB, as well as explain the theoretical framework and methods
applied to answer those questions. The second chapter will first take a look at the process leading up to the
2011 proposal which was driven by the Commission’s desire to remove tax obstacles that prevent the well-
functioning of the internal market. Furthermore, this thesis will argue how the proposal got stuck in negotiations
due to the opposition of several Member States. The third chapter will look at how the 2016 proposal has been
driven by the need to tackle corporate tax avoidance after a series of large-scale tax scandals. In the final part
of this paper, a comparison between the two proposals and their political settings will be made to understand
the likelihood of success of the new CCCTB proposal. While it is impossible to predict the outcome of the
negotiations on the new proposal, it appears an agreement on the CCCTB in the near future is unlikely.
Although in the long run, the renewed proposal has a much better chance at being adopted.

1.1 Research questions

Firstly, why is the Commission is now proposing the CCCTB again? To answer this, several sub-questions will
need to be answered:

 What did the political processes for the two proposals look like, which factors have played?

 Which actors have played a role? What has been the role of the different EU institutions and other
stakeholders?

Secondly, what are the chance of the CCCTB proposal going forward and becoming reality? What are the
differences between the 2016 and 2011 CCCTB? Are there prospect and obstacles that make it more or less,
likely for the proposal to succeed?

1.2 Central concepts and literature review

1.2.1 Multinational corporations in the globalised economy

Spero & Hart (2010) define a multinational corporation (MNC)1 as “an enterprise that engages in foreign direct
investment (FDI) and that owns or controls value-added activities in more than one country”. This highlights
two essential aspects of MNCs. An MNC operates internationally and is a collection of multiple entities under

1 Synonyms of multinational corporation (MNC) are multinational enterprise (MNE), transnational corporation
or enterprise (TNC or TNE).

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the control of one single corporate structure or entity. MNC activities vary widely in activities and organisational
structure, but they often tend to produce, trade and invest across borders at the same time.

MNCs can be traced back centuries, but have become increasingly prominent since the late nineteenth
century. Their influence increased dramatically after the end of World War II and even more after the end of
the Soviet Union. This has coincided with the significant growth of both the services and digital markets in the
globalised economy. MNCs now represent a large share of the global economy, they produce about 10% of
the total global GDP (UNCTAD in Oatley, 2010) and intrafirm trade now represents about 80% of global trade
(UNCTAD, 2013).

MNCs play a conspicuous and contentious role in today’s global economy, because of their size and the
unclear space between national politics and the globalised economy, in which they navigate (OECD, 2013;
Spero & Hart, 2010). MNCs’ international and profit-seeking interests will often bring them into conflict with the
interests of the citizens and states in which they operate. MNCs operate across jurisdictions and have mainly
their stockholders to answer to. Governments are meant to defend the interests of their citizens and remain
bound to a certain political and territorial space, applying taxation as an essential part of their national
sovereignty. Those national states might have conflicting interests and rules as well (Oatley, 2010).

MNCs operate simultaneously in multiple (national) jurisdictions. The misalignment of different fiscal laws of
two or more states can lead to so-called hybrid mismatches, e.g. asymmetries in determining residence,
ownership or the tax base. MNCs can struggle to decide which national legislation to follow, risking double
taxation, but also risking double non-taxation by allowing MNCs to exploit those gaps for their own benefit
(OECD, 2013; Peeters & Seré, 2016; Picciotto, 2012).

National states are only weakly coordinating their efforts to enforce taxation, while MNCs have the benefit of
centralised power structure to organise their taxes internationally. This gap is at the centre of the problem of
tax avoidance by MNCs because those opportunities have been exploited by MNCs to aggressively plan their
tax efforts in order to avoid taxes (Picciotto, 2012).

1.2.2 Tax avoidance

Tax avoidance is often confused with similar terms like (aggressive) tax planning, dodging, fraud and evasion.

Tax evasion (or fraud) can be defined as an “illegal activity that results in not paying or under-paying taxes
(Eurodad, 2015a).” Tax avoidance is a term to describe “the legal means by which businesses or individuals
use tax laws to lower their tax liability (Peeters & Seré, 2016)”. This can for example mean that potential
taxpayers try to circumvent a taxable activity by avoiding that a tax base is created in the first place (Impens
& Suys, 2014).

While in theory the difference between illegal evasion and legal avoidance seems clear, the distinction will in
practice often be very ambiguous, as there is no clear line between the two (Peeters & Seré, 2016) and often
a legal ruling will be needed to determine the (il-)legality of individual cases (Impens & Suys, 2014).
Nevertheless, tax evasion is not in the scope of this paper.

12
Companies, and many individual citizens, also use tax planning legitimately, to reduce their tax liability by
applying existing rules and legislation that are purposely designed to allow this. This is a basic way for
governments to incentivise or encourage certain behaviour or practices. What sets tax avoidance apart from
tax planning is that avoidance is often denounced as illegitimate or “highly immoral and undesirable (Eurodad,
2015a).” Avoidance is increasingly being perceived negatively as a distortion of the spirit of the law and
problematic because of its large scale use. This makes the difference between tax avoidance and planning
ethical, rather than legal (Peeters & Seré, 2016). Aggressive tax planning is generally used as a synonym for
tax avoidance, or rather to describe the methods individuals or companies use to avoid taxes.

This thesis will refrain from using ‘tax dodging’, as its definition is unclear. Dodging is often used by NGOs or
campaigners like Eurodad (2015 & 2016) to describe both tax avoidance and evasion, but does not occur in
an academic context.

1.2.3 The international tax system: a complex and uncoordinated network of

bilateral tax treaties
At the centre of the international tax system is a complex network of mostly bilateral ‘double tax treaties’ (DTT)
that aim to prevent both double taxation and non-taxation (Picciotto, 2013).

Most of these DTTs follow so-called model treaties, which have their origin in the work of the League of Nations’
(LoN) Fiscal Committee in the 1920s to 1940s. Since 1956, the Organisation for Economic Cooperation
(OECD) has been the dominant international body for taxation, but has long been criticised for asymmetrically
advantaging the interests of developed countries and for failing to stop large-scale tax avoidance and evasion
(Picciotto, 2012, 2013).

Calls to develop a more inclusive and fair international tax system, ideally based on the work of an
intergovernmental UN tax body, have been around for decades (Tax Justice Network, 2015). While the UN
tried to take over the LoN’s role after WWII, it became deadlocked because its members were too divided. The
UN remains side-lined today, because its small tax body is permanently understaffed, while calls for an
upgrade of that body have consistently been blocked by the OECD’s members (Picciotto, 2012).

Unlike the UN, the G20 has been playing a small role in tax matters in recent years, by for example requesting
in 2012 that the OECD develops the BEPS initiative (G20, 2012; Picciotto, 2013).

The continued dominance of the OECD goes hand in hand with criticism towards “the culture of international
tax (Picciotto, 2013, p. 9).” Meaning the intra-connected community of international tax experts that tend to
dominate tax discussions. Many work in the private sector and have over time seemingly developed their own
“knowledge, language and culture (Picciotto, 2012, p. 3).” Critics argue that these experts and the technicalities
of their work act as a shield against political accountability and are an unofficial, but influential, lobby for
corporate interests (Picciotto, 2012, 2013).

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1.2.3.1 The flawed separate entity approach and arm’s length principle at the heart of international
corporate taxation

The model DTTs are the “formal legal structures of international tax coordination” (Picciotto, 2012, p. 2) and
follow the ‘separate entity’ approach as a basic doctrine. This treats MNCs as different loose groups of
separate entities instead of the single, centrally managed groups that they are. When taxing an MNC, each
state or jurisdiction in which an MNC operates will only look at those parts of the MNC operating in its own
territory. MNCs are then supposed to follow the arm’s length principle: arranging their intrafirm transfers as if
their subsidiaries were independent of each other, while adopting ‘fair market prices’ for the intrafirm traded
goods (Picciotto, 2012, 2013; Zucman, 2015).

It was already clear this was a fiction when this principle was established in the 1930s, but the aim was to
make sure that MNCs, despite having foreign investors, received the same treatment as their local competitors.
It was theoretically also easier to establish a fair price, since international trade was still mainly goods-based
(Picciotto, 2012).

MNCs can use this uncoordinated, complex system to aggressively plan their taxes. They can avoid paying
taxes in countries with higher rates by exploiting the gaps between different national taxation systems to move
profits between different subsidiaries to low-tax jurisdictions. This allows MNCs to satisfy their profit-seeking
needs until they pay little to no corporate income tax. This geographic mismatch between MNCs’ economic
activities and their tax declarations is the central problem of the international corporate taxation (Cobham &
Janský, 2015; Picciotto, 2012; Zucman, 2015).

1.2.4 How corporate tax avoidance works: the main techniques

The two main methods used by MNCs to avoid taxes within the international tax system are well-known:

A first technique is the use of intragroup loans, where debt is transferred to subsidiaries in countries with
higher tax rates to reduce profits there and instead channel them to low-tax countries. However, it is relatively
easy for tax authorities to discover this kind of technique (Zucman, 2015).

The second and main technique is transfer pricing, by which an MNC will alter the prices of transfers between
two or more of its entities to its benefit, shifting profits made in high-tax countries to low-tax territories. MNCs
can also use subsidiaries in low-tax jurisdictions to shift profits. These subsidiaries will carry out services or
act as holding companies for assets, allowing TNCs to pay lower taxes. Despite many of these subsidiaries
existing only on paper, they can even charge inflated fees, shifting big amounts of profit to low-tax territories
and thus lowering the overall tax liability of an MNC (Picciotto, 2012, 2013; Zucman, 2015).

While well known, transfer pricing can be hard to detect for two main reasons. Firstly, tax authorities are looking
at billions of intrafirm transfers annually, which is fundamentally challenging even for tax authorities with
significant resources. Secondly, it was already difficult to determine a fair price for intragroup transfers when
international trade was mainly goods-based, but it has become almost impossible to do so due to the double
shift to more digital goods and more service-based economies (Spero & Hart, 2010). Patents, logos and digital
assets like algorithms have no clear reference price and are easily subjected to manipulation. All of this makes
the arm’s length principle almost impossible to enforce (Picciotto, 2012; Zucman, 2015).
14
1.2.5 How corporate tax avoidance works: tax havens
Offshore financial centres, secrecy or low-tax jurisdictions or territories, or simply tax havens? Whatever the
name used, they play a central role in corporate tax avoidance. What is mainly important for this research is
to understand which EU Member States could be seen as tax havens or to have features of tax havens,
because that is likely to influence their attitude towards EU policies trying to tackle tax avoidance (Bowers,
2017). This thesis will continue to use the term tax haven, though with some notes below as it remains
important to note that the terms tax haven and its successor offshore financial centre, have long been
considered problematic for several reasons (Cobham, Janský, & Meinzer, 2015):

First, both terms are widely used, but as is often the case within Political Sciences, neither have a widely
agreed upon definition (Cobham et al., 2015). Shaxson (2011, p. 181) offers one definition that is useful
because it is rather broad: “It is a place that seeks to attract money by offering politically stable facilities to help
people or entities get around the rules, laws, and regulations of jurisdictions elsewhere.”

Second, research risks being biased towards “offshoreness (Cobham et al., 2015, p. 283).” because the terms
bring to mind far-off places like the Bahamas and Panama. It is vital to understand that many major economies,
including many EU Member States, can equally be identified as tax havens, but have managed to escape this
moniker (Weyzig, 2015).

Third, the terms have too often led to a binary approach: forming clear cut lists of which territories are tax
havens by setting minimum criteria. This is not compatible with the reality, where many jurisdictions offer
different ways to avoid taxes by setting up mixed degrees of various components like secrecy, low rates, tax
regimes, etc. (Cobham et al., 2015).

The OECD and the EU have been trying to compose binary blacklists of tax havens, but both efforts have
been criticised. The OECD was mainly criticised for using too low minimum standards, exemplified by only one
state being on the final list (Houlder, 2017; Tax Justice Network, 2016a). Similarly, the EU list, which is
expected by the end of 2017, has been criticised from the beginning because of its secret compilation process
(Comte, 2016).

To really get a sense of which jurisdictions can be considered tax havens it makes sense to use more
spectrum-based approaches that acknowledge the different features and degrees of tax ‘havenry’. Shaxson
(2011) and Cobham et al. (2015) identified some of the most common features. First and foremost, they offer
different forms of secrecy. Second, tax rates will be very low or even close to zero. Third, financial interests
will play a central role in the politics of that jurisdiction. Meaningful opposition to their model of financial dealings
will be non-existent or at least very limited. Lastly, its representatives tend to vehemently deny that they are
tax havens (though that is rather impossible to measure).

One example of such a spectrum is Tax Justice Network (TJN)’s Financial Secrecy Index (FSI), listing
jurisdictions on a secrecy spectrum (Cobham et al., 2015). A completely different spectrum-approach can be
found in Garcia-Bernardo, Fichtner, Takes, & Heemskerk (2017)’s study on Offshore Financial Centres
(OFCs). Without defining an OFC, but instead using data-driven network analysis which tracks value flows and

15
compares them to the real economies of those territories, they have made a useful distinction between two
kinds of OFCs:

 “Sink-OFC: a jurisdiction in which a disproportional amount of value disappears from the economic
system.

 Conduit-OFC: a jurisdiction through which a disproportional amount of value moves toward sink-
OFCs. (CORPNET & University of Amsterdam, n.d.)”

Looking at which countries feature in these rankings, a rather clear pattern emerges. In Europe, Switzerland
is generally named as being the oldest and most central example of such practices. A number of Member
States have also repeatedly been singled out as tax havens, most notably Luxembourg (sink), the Netherlands
(conduit), Ireland (conduit), and especially the UK2. But also Malta, Cyprus, Austria, Belgium, or even Germany
and France have features of tax havens (Garcia-Bernardo et al., 2017; Shaxson, 2011; Tax Justice Network,
n.d.-c; Weyzig, 2015).

1.2.6 Evidence of tax avoidance by MNCs

If MNCs indeed exploit hybrid mismatches, then to what extent? Measuring MNCs’ tax contributions and so
avoidance is generally difficult because of the ‘nature of the beast’. International flows of capital are
increasingly mobile and can be double-counted, tax regimes and rates vary widely, etc. It is difficult to separate
MNCs from other businesses in macroeconomic data. The financial affairs of MNCs are still shrouded in
secrecy, especially their tax affairs. So the biggest challenge is the lack of clear data and any current data set
will be somewhat flawed (Cobham & Janský, 2015; UNCTAD, 2015; Zucman, 2015).

Besides, it is difficult to quantify how much MNCs currently contribute to government revenues. The 2015
World Investment Report’s estimates that the foreign branches of MNC’s contribute on average about 15% of
corporate tax income and 5% of the total tax income of developed countries, or 23% and 10% respectively for
developing countries (UNCTAD, 2015). Businesses of course also contribute to state budgets in other ways,
„through royalties on natural resources, tariffs, payroll taxes and social contributions, and other types of taxes
and levies. (UNCTAD, 2015, p. 184)”

It has long been difficult to find the necessary data to measure tax avoidance, but most older studies like those
in Devereux & Maffini (2006) and Clausing (2003) do find convincing and direct evidence of profit shifting by
MNCs.

More recently, a steady stream of reports on profit shifting by individual MNCs has started to bring the public’s
attention to tax avoidance by well-known companies like Apple, McDonald’s, Engie, Amazon, Facebook,
Google, Starbucks, etc. (Farrell & McDonald, 2016; Fioretti, 2016; Goodley, Bowers, & Rogers, 2012; Houlder,
Barker, & Beesley, 2016; Neate, 2015) Yet it has especially been the surge in bigger tax scandals like

2 If the UK’s whole sphere of influence would be included, it would often rank nr. 1 with the mainland as a
conduit and its territories as sinks (Cobham, Janský, & Meinzer, 2015; Garcia-Bernardo, Fichtner, Takes, &
Heemskerk, 2017)

16
LuxLeaks, PanamaPapers, SwissLeaks and BahamaLeaks, that have truly brought to light the enormity of tax
avoidance by MNCs (International Consortium of Investigative Journalists, 2014, 2015, 2016a, 2016b).

These reports have coincided with and contributed to a number of new studies that have successfully managed
to quantify global tax avoidance and evasion.

Supporting research into tax avoidance has also been a central part and goal of the OECD’s BEPS process.
Action 11 was especially designed to map profit shifting (Cobham & Janský, 2015; OECD, 2015). The final
BEPS reports estimate that 4 to 10% of global corporate income tax revenue (or between US $100 and 240
billion) is lost every year due to tax avoidance by MNCs (OECD, 2015). But the final BEPS report has also
been criticised as “a major missed opportunity to make good use of valuable data (Cobham & Janský, 2015,
pp. 24-25)”. The numbers that will be gathered through the Country-by-Country Reporting that Action 13
introduced will not be fully public, nor organised systematically, and so altogether not transparent (Cobham &
Janský, 2015).

Hence it remains unclear how precise the above numbers are. They seem rather modest compared to what
researchers like Zucman (2015) and Cobham & Janský (2015, 2017) have found by tracing anomalies between
profits and economic activity in (inter)national financial data.

Zucman estimates that at least 8% of global wealth is hidden in tax havens, of which three quarters goes
undeclared and claims this number has risen between 2008 and 2015. Cobham & Janský (2017)’s findings
suggest that around US$500 billion is lost to tax avoidance globally, while Zucman (2015) estimates that US-
based MNCs are able to lower their tax bill by almost US$120 billion through tax avoidance and has reasons
to believe the similar results could be found for EU-based companies.

Cobham & Janský (2015) used the available data on US-headquartered MNCs to assess „which jurisdictions
are the main winners and losers in terms of tax base (Cobham & Janský, 2015, p. 6).” Their conclusions are
twofold. First of all, the 2008 financial crisis seems to have had little to no impact on tax avoidance by US-
based MNCs, nor has it reversed the growing misalignment between profits and economic activity since the
1990s. Secondly, the study confirms that there are indeed a small number of low-tax jurisdictions who have
managed to attract excessive amounts of profits compared to their actual economic activity.

While the precise numbers might still be missing, these are altogether strong indications that MNCs pay an
effective tax rate that is much below their statutory one and that they avoid taxes on a large scale.

1.2.7 The impact of tax avoidance

“The concept of tax justice underpinning the fiscal state rests on the broad acceptance as legitimate of both
fairness in raising taxes and the effectiveness and accountability of expenditure (Picciotto, 2013, p.7).”

Tax avoidance undermines this societal pact and harms all stakeholders:

 Other governments: Tax avoidance means less revenue and higher compliance costs. The under-
funding of sometimes basic services can prevent states from fulfilling basic public needs which

17
 can cause or worsen crises. Unfair tax competition by tax havens leads to increasing tax
competition between states, forcing states to down their tax rates even more. Perhaps most
worryingly, when citizens and SMEs perceive that MNCs are able to avoid taxes, their trust in the
fairness of government is undercut (OECD, 2013; Zucman, 2015).

 Individual citizens: Tax revenue losses mean that other taxpayers will have to fill the budgetary
gaps and are likely to receive less good services from their government in return (OECD, 2013;
Picciotto, 2013).

 Businesses mainly risk reputational damage. But those companies not willing to engage in tax
avoidance, or those working within one territory who have no or less chances for reducing their
tax liabilities, will have higher effective tax rates and so have a competitive disadvantage to larger
MNCs who do avoid taxes. In general, tax avoidance creates unfair market distortions (OECD,
2013, 2015).

 Tax havens: When artificially large amounts of profits are shifted to tax havens, its economy will
increasingly come to rely on its outsized financial sector. This makes those states vulnerable to
sudden shocks, e.g. Ireland and Cyprus recently (Zucman, 2015). The dominance of the financial
sector can raise prices of goods and produce a brain drain from other sectors. A financial sector’s
outsized weight can also challenge democratic governance. When a country relies on its financial
sector so much, their ability to threaten to leave can come to block any attempts at reforms (Tax
Justice Network, n.d.-b).

1.2.8 Tackling tax avoidance by MNCs

There is an ongoing discussion about how to tackle corporate tax avoidance. One option is to simply lower the
corporate tax rates, theoretically rendering competition between low-tax jurisdictions and other states void.
Cobham & Janský (2017) argue that this not an effective way to tackle avoidance, citing several other studies
which show that profit shifting has continued growing even in those jurisdictions where effective rates have
gone down sharply. Instead of further focusing on this race to the bottom and the tax rates debate, this thesis
will focus on two broader approaches that tackle tax avoidance through legislation.

The first, as supported and promoted by the OECD aims to tackle tax avoidance by a series of small, ad-hoc
reforms of the international corporate taxation system. But authors like Picciotto (2012) and Zucman (2015),
as well as NGOs like Eurodad, Oxfam International and TJN (Eurodad, 2016; Weyzig, 2015) argue that the
current international taxation system is fundamentally flawed and needs to be replaced by an alternative
system for taxing MNCs: unitary taxation (UT).

1.2.8.1 Existing ad-hoc anti-tax avoidance measures and projects

As shown above, tax avoidance by MNCs remains rampant within the current international tax system. The
problem of tax avoidance within the separate-entity based system can ostensibly be reduced to two simple
questions: one of ownership and one of determining a fair price for intragroup transfers. And so several

18
methods already exists by which tax authorities have tried to tackle abuse of the existing tax system (Peeters
& Seré, 2016).

Such rules regulating transfer pricing fit best within the OECD-frame and have a long history there, as the
OECD has been focusing on corporate tax avoidance since at least 1998 (OECD, 2015; Picciotto, 2012, 2013;
Sikka & Murphy, 2015). The most recent attempt by the OECD to tackle tax avoidance is the 2013-2015 base
erosion and profit shifting (BEPS) process.

1.2.8.2 The BEPS project

The OECD’s BEPS project (or process) is the most substantial recent example of an international effort
attempting to close the gaps in the current international tax system, without changing its main principles. The
BEPS Action Plan was launched by the OECD in 2013 at the request of the G20 (G20, 2012), as they had
been under increasing political pressures to tackle corporate tax avoidance (Cobham & Janský, 2015). The
BEPS process finished in 2015 and resulted in 15 final actions aimed at tackling different aspects of corporate
tax avoidance (Gimdal, 2017; OECD, 2015). These are now being implemented and translated into legislation
for example by the Commission in the form of the 2016 Anti-Tax Avoidance Directive (Gimdal, 2017).

Despite having the explicit goal of realigning profits and economic activities, the OECD made it clear from the
start that moving away from the basic principles of the international tax system was “not a viable way forward
(OECD, 2013, p. 14).” According to the initial BEPS action plan, there was a consensus among OECD
Members States that the outcomes of a move towards unitary taxation would be too uncertain and stressed
the importance of “clarity and predictability (OECD, 2013, p. 10)”.

The BEPS process has been criticised on multiple accounts. First, for not being inclusive enough, as
developing countries, which are hit relatively harder by tax avoidance, were not a full part of the process.
Second, the final solutions have been criticised for not fundamentally changing anything and adding more
complexity to international tax system (Eurodad & Ryding, 2015; Weyzig, 2015). The central fear of critics is
that countries with harmful tax regimes will continue doing what they have done in the past: replace their old
practices with equally harmful new ones, like Belgium did when it replaced its coordination centres with a
notional interest deduction regime (Weyzig, 2015).

1.2.8.3 Unitary taxation

The EU proposals for a CCCTB stem from the “unitary business approach (Gimdal, 2017)”, sometimes also
referred to as formulary apportionment, which regards MNCs as one single entity and assumes that the income
of an MNC is earned by that company as a whole (Sikka & Murphy, 2015).

The goals of UT are twofold. UT aims to be an international taxation system which more closely reflects
economic reality by quantifying the actual geographic location of economic activities. UT also aims to establish
a ‘territorial’ principle: tax should be paid where the activities generating the income take place, since taxes
enable those activities by funding education, infrastructure, etc.

UT could significantly simplify the international tax system and it would end the advantages MNCs have over
tax authorities. Authorities would no longer need to control if billions of intrafirm transactions happen fairly, nor
implement complex anti-avoidance rules, nor struggle with each other over questions of jurisdiction and

19
residence (Picciotto, 2012; Zucman, 2015). MNCs themselves would also benefit from UT, as they would no
longer have to spend fortunes on fees for tax consultancy firms who specialise in facilitating (aggressive) tax
planning (Picciotto, 2013; Zucman, 2015).

Different forms of UT have already been used sub-nationally by several federal states for many decades,
including in the USA, Canada and, somewhat ironically perhaps, Switzerland (Dayle Siu, Nalukwago, & Pereira
Valadão, 2017; Picciotto, 2013; Zucman, 2015).

For a full UT system to be applied, three out of four steps of the taxation process need to be developed and
agreed upon: combined reporting, profit apportionment and a resolution procedure. The fourth step, the tax
rates, does not need any common agreement, as countries are able to tax ‘their’ portion of the global profits
at their own rate (Picciotto, 2012, 2013).

First, the profits and losses of the whole MNC are added together in order to calculate one single and common
amount of profits. To be able to calculate this tax base, MNCs would be obliged to file a “Combined and
Country by Country Report (CaCbCR) (Picciotto, 2013, p. 27)” in each country where they are active. The
format could differ according to countries, but they should report on all of their worldwide activities, including
a set of consolidated accounts of the whole MNC, information about their different entities and the necessary
accompanying data. For this to happen, definitions of the unitary business and of the common tax base would
need to be developed (Martens Weiner, 2002; Picciotto, 2012). While UT would theoretically require a
worldwide combined report, some UT systems have opted for a water’s edge approach, including only
domestic income in the reporting and thus in the tax base (Dayle Siu et al., 2017). This is also the case for the
CCCTB, which limits its tax base to EU-based activities.

Secondly, this tax base is divided up or ‘apportioned‘ among those countries, using a formula based on
weighted factors which aim to reflect real economic activities. Apportionment would for example stop MNCs
from shifting profit away from where they actually sell goods, as in the case of Amazon

For this profit or formula apportionment, an allocation formula with weighted factors needs to be determined
(Martens Weiner, 2002). Most commonly, this would be according to physical assets, labour by physical
location and sales by destination country (Picciotto, 2012, 2013), as is the case with the CCCTB. However,
other sales-focused formulas have also been used, taking only into account sales or increasing that factor’s
weight in the formula (Dayle Siu et al., 2017).

Assets should according to UT only mean tangible assets. Including intangible ones (patents, trademarks, etc.)
would open a new door to manipulation for tax avoidance purposes, e.g. it is difficult to geographically locate
a patent. Labour can also be tricky to measure, due to wide differences in wage-levels between different
countries. One option is then to weigh both salary costs and the amount of employees. Additionally,
determining the location of sales is also becoming increasingly challenging in the internet economy (Picciotto,
2012, 2013).

In any case, the exact weighting of the formula will be subject to a great deal of debate, as investments might
possibly be affected. States are likely to argue for a formula which provides them with most revenue: Countries
with higher wages might prefer to give more weight to payroll, while bigger economies might benefit from
weighing sales more heavily, etc. (Picciotto, 2012) It is also possible to adopt different formulas for different
20
sectors, as the transport sector might need a different formula because it can be difficult to determine the
location of a ship or truck. Another possibility is to supplement corporate tax with other taxes, for example a
royalty tax to ensure the mining industry pays its fair share (Picciotto, 2013). A key question will be how to
balance consumption (sales) with production (assets and labour), as this is not fixed. Historically, each factor
has been weighted with one third, like both CCCTB proposals and the US system. In the US, states have
started to weigh sales twice, while the EP has proposed to weigh sales with only 10% and rather weigh assets
and labour with 45% each (Picciotto, 2012).

The third part of adopting UT is to agree on some sort of conflict resolution in order to avoid double taxation of
MNCs because two states might disagree about for example a certain aspect of the apportionment. In fact,
such procedures already exist as part of the current international corporate tax system, the so-called mutual
agreement procedure (MAP) and could be adopted to accommodate UT. However, MAP is currently
considered to be very secretive. In order to prevent opposition against UT, it might be wise to enhance the
transparency of MAPs e.g. by publishing settlement results (Picciotto, 2012, 2013).

Finally, it is vital to reiterate that under UT, states will continue to choose their own corporate tax rates. The
benefit of UT is that by closing the main loopholes that have allowed MNCs to avoid taxes, it would also
theoretically end harmful tax competition (Picciotto, 2013).

1.2.9 Corporate taxation at the EU level: a slow path to tax harmonisation

Since the start of the European integration project, there have been ongoing discussions about how to organise
taxation within an integrated Europe. The CCCTB proposal fits into a tradition of the Commission (and its
predecessors) proposing different forms of tax harmonisation, going as far back the 1962 Neumark Report to
the European Economic Community, which already proposed tax harmonisation instead of a common
European tax policy (Pîrvu, 2012).

The Commission has made some radical proposals for taxation measures in the past. However, after all those
far-reaching proposals had been rejected during the 1980s, the Commission adopted an approach that was
more respectful of subsidiarity (Pîrvu, 2012). Regardless, progress within the field of direct taxation has
remained slow.

Tax harmonisation can be defined “as a process of organising the tax systems of different countries along
similar lines (Pîrvu, 2012)”, which, within the context of the EU, is translated to bringing Member States’ tax
systems closer together to complete the processes set out in the different treaties, most notably the process
of completing the Single Market (Pîrvu, 2012). Taxation legislation requires unanimity in the Council for
adoption, according to the special legislative procedure (Appel & Block, 2015; European Commission, 2015c).

The Commission has, since at least the early 1990s worked on the basis of often slow negotiations with all
Member States (European Commission, 2001b). The other institutions are somewhat sidelined and while the
EP must be consulted on taxation proposals, the Council has no obligation to follow the EP’s recommendations
(European Council & Council of the EU, 2014). Since the Treaty of Amsterdam, it is also possible for a smaller
group of Member States to work together on taxation or other topics under the enhanced cooperation

21
mechanism (Publications Office, n.d.). For example several Member States are currently trying with the
negotiations on a Financial Transaction Tax (Picciotto, 2012).

Taxation issues are decided in the Economic and Financial Affairs (ECOFIN) formation of the Council.
However, before those meetings, much of the preparatory work and technical discussions happen in the
Council’s preparatory bodies (Vos, 2011).

Since 1997, the secretive Code of Conduct Group on Business Taxation has played a central role in these
discussions (Pîrvu, 2012). It gathers national officials in order to tackle harmful tax competition between
Member States, by studying and discussing national legislation (European Council & Council of the EU,
2017a). There is almost no public information about the content of their regular meetings, except that they are
highly confidential and technical. After the LuxLeaks scandal, the TAXE committee tried to investigate the
Group and push it towards more transparency, but those attempts failed (Eurodad, 2015a). Recent revelations
also showed how a small group of Member States are effectively blocking efforts to jointly tackle tax avoidance
and evasion, as well as any reforms of its working procedure and mandate (Bowers, 2017). Regardless, the
Group continues to play a central role and is currently working on the above-mentioned EU tax haven blacklist
(Comte, 2016).

All in all, attempts at tax harmonisation in the EU has so far been mostly unsuccessful, as will be demonstrated
further on. This can mainly be attributed to the failure to reach unanimity on proposals in the past, as there is
a tendancy for some Member States to block proposals. Pîrvu (2012, p. 61) identifies three recurring
arguments against harmonisation: that tax competition is something positive rather than negative, that some
Member States need special tax regimes “to compensate for location disadvantages” and that tax
harmonisation on the EU-level unfairly curtails national sovereignty.

1.3 Theoretical Framework and Methodology

Studying any EU policy process can be overwhelming, simply down to the amount of closely intertwined issues,
actors and institutions and the interactions between them. This seems particularly so in the case of the CCCTB,
which can be traced back decades. To grasp this whole timeline, one needs a lens to operationalise this study.

One particularly useful lens is provided by the multiple streams framework (MSF), which challenges the notion
that a policy process is always linear and rational, rather, it assumes it is mainly in a state of complexity and
ambiguity. The MSF was particularly built on Simon (1955; 1979 in Devos et al., 2009)’s idea of ‘bounded
rationality’ and Cohen, March and Olsen (1972 in (Devos et al., 2009)’s ‘Garbage Can Model’. Both stem from
an unhappiness with the prevalent normative rational choice-models at the time, which focused rather on how
decision-makers should behave, than on how they actually behave.

The main assumption of ‘bounded rationality’ is that decision-makers have limited resources, such as time,
knowledge, information and ability to spend on specific policies or problems, leading to them making decisions
“in the face of uncertainty (Cairney & Zahariadis, 2016, p. 89).” The Garbage Can Model compares the policy
process to a garbage can in which problems are dumped and when linked can come out as solutions. This
model established the basic premise of MSF that, during the policy process, “…problems, solutions, decision

22
makers and choice opportunities are independent, exogenous streams. (March & Olsen, 1989 in Devos et al.,
2009, p.63)”

Kingdon followed these ideas when he developed the MSF in 1984 to explain how organisations can act as
‘organised anarchies’: they do not have clear preferences or goals, have continuously changing participants,
and have unclear technologies because their decision-making is shaped by trial-and-error, experience and
pragmatism (Devos et al., 2009).

1.3.1 A Multiple Stream Framework to study the EU policy process

The MSF, originally developed to explain agenda-setting in the US, has since been tested in different settings.
Recent work, e.g. by Zahariadis (2008) and Ackrill et al. (2013) has highlighted its potential as a useful
framework to study the full scope of EU policy processes. What also makes EU-use of MSF interesting and
challenging, is that only a limited amount of scholars have used a full-fledged MSF to analyse (cases of) EU
cases (Ackrill et al., 2013).

Through studies like Ackrill et al. (2013), Cairney & Zahariadis (2016) and Zahariadis (2008), a lens tailored to
EU-studies can be formed. Next, I will explain its three assumptions, three streams and five aspects, while
establishing in EU-studies and the CCCTB’s case.

1.3.1.1 Assumptions

First, uncertainty. Policy-makers tend to have a long list of problems, only a limited amount of time to deal with
them and information will often be shorthand or contradictory. Due to this state of bounded rationality, they will
be forced to pick certain issues to tackle and have to be hands-on to get anything done. Decision-makers are
forced to filter out information from trusted sources, which leads to decisions and their outcomes being
somewhat ambiguous. Because of this practical impossibility to come to the most optimal and informed
solutions, decision-makers are instead forced to settle for satisfying ones, weighing uncertain risks and
rewards (Ackrill et al., 2013; Cairney & Zahariadis, 2016).

Second, “ambiguity permeates the process (Ackrill et al., 2013)” as throughout the unstable EU policy process,
issues will be tackled by many, fluid (groups of) policy-makers, each with varying – and often undefined –
goals, while using opaque strategies to shape the outcomes. When a proposal passes through an EU policy
process it is likely to be discussed by a range of institutions with continuously changing personnel and
representatives. Most of those policy-makers will have undefined preferences and many of them will not be
aware of the wider EU policy context. Adding to the ambiguity is the complex institutional setup of the EU,
where institutions often share responsibilities and are regularly involved in turf battles (Ackrill et al., 2013;
Zahariadis, 2008).

This combination of ambiguity and uncertainty leads to a non-linear and messy policy process, as well as the
last assumption: politics, policies and solutions as three relatively independent streams within “a primeval soup
of ideas (Cairney & Zahariadis, 2016, p.98).” Policies will be more likely to be adopted when these three
streams emerge together at the same time, opening a so-called policy window. This process is open to
manipulation by skilled policy entrepreneurs, who will try to couple the streams “by ‘selling’ their package of
problem and policy to a receptive political audience (Zahariadis, 2008)”.
23
Devos et al. (2009) notes how these are not universal assumptions that will reflect all organisations, but that
organisations should rather be placed on a continuum between perfectly rational-linear and the state of
extreme ambiguity and uncertainty described above. However, considering the EU’s institutional and
substantive fluidity and complexity, as well as varying timeframes, it seems quite clear that “ambiguity and
randomness are part of normal EU policy-making (Ackrill et al., 2013, p. 872)”. The EU is clearly not on the
rational-linear side of this scope and so an excellent fit for multiple stream analysis.

In their meta-study of applications of the MSF, Jones et al. (cited in Cairney & Zahariadis, 2016) identified 311
meaningful uses of MSF between 2000-2014, which highlights what Cairney & Zahariadis (2016) call the
“universal” appeal of MSF. The strength of MSF is the flexible metaphor it provides to analytically separate a
complicated policy process in different streams. But flexibility is also MSF’s main challenge, as this makes it
more difficult to operationalise the MSF and thus come to any meaningful conclusions which can be disproven.
To do so, a better understanding and definition of the different streams and concepts used by the MSF is
needed.

1.3.1.2 Problem stream

The MSF sees problems as conditions which actors believe are in need of attention or prefer to address (Ackrill
et al., 2013; Devos et al., 2009; Zahariadis, 2008). Problems are continuously competing for attention from
decision-makers and actors will generally use three recurring strategies to make the case for their preferred
problem(s):

 ‘Focusing events’ or crises can highlight problems, or be used to bring problems to attention
(Cairney & Zahariadis, 2016). Policy-makers can use national and international focusing events to
push problems onto the EU agenda (Zahariadis, 2008).

 Variations in policy-relevant indicators can be used by policy-makers as devices to indicate the

existence and magnitude of a problem. Indicators are more likely to get a reaction if the social
condition it describes is more valued or affects more people, but that is no guarantee for a
response (Ackrill et al., 2013). Cairney & Zahariadis (2016) use the example of unemployment
numbers to argue that many indicators will require multiple values, so that policy-makers can argue
that a particular change is a problem. E.g. 10% unemployment as such is not necessarily an issue,
but a jump from 6% to 10% is likely to attract public scrutiny.

 Cairney & Zahariadis (2016) identified a last strategy: Decision-makers can interpret the links
between past policies and current problems differently, to mark past policy as failures or
successes. This way, they can highlight issues and solutions both new and old.

1.3.1.3 Policy stream

The policy stream consists of a ‘primeval soup’ of proposals and ideas which policy-makers and -influencers
are advocating. These individuals are often specialists in EU policy coming from the EC, national
administrations, special interest groups, etc. The soup metaphor highlights the large amount of competing
proposals which are being debated in EU networks at any one time, of which few are ever formally proposed,
let alone adopted. As mentioned before, policies can develop independent of problems in the way the CCCTB

24
proposal seems to have originally been developed independently from the problem of tax avoidance (Ackrill et
al., 2013; Cairney & Zahariadis, 2016; Devos et al., 2009; Zahariadis, 2008). It is hard to predict whether or
not a solution goes forward, but there seem to be some indicators:

 “Technical feasibility (Zahariadis, 2008, p. 518)” – a proposed solution which requires less
changes to current laws is more likely to be adopted than one requiring vast changes

 “Value acceptability (Zahariadis, 2008, p. 518)” – if the proposal’s perceived values or impact (e.g.
justice or efficiency) appeal to many of the major participants in the network, a proposal is more
likely to be adopted. A significant constraint in this aspect can be the budgetary impact of a
proposal.

1.3.1.4 Politics stream

“Politics constitutes the broader environment within which policy is made (Ackrill et al., 2013, p. 873)” and the
politics stream is determined by the developments within the political climate (Devos et al., 2009, p. 143). The
way this politics stream is operationalised will depend on the institutional structure of the organisations.
Generally, it includes aspects like legislative and administrative turnover, ‘the national mood’ and the balance
of power between participants. Zahariadis (2008) offers three EU-specific factors that further determine this
stream:

 The partisan balance in the EP will normally have an impact on decision-making. However, the
EP has only an advisory role in taxation issues, so their influence in the CCCTB case seems
limited to that of a principal pressure group.

 The balance of Council members: election cycles of the EU Member States are not aligned. So
when elections take place in Member States and new governments are formed, the national and
partisan affiliation in the Council can shift. As the decision-making on taxation issues is based on
unanimity, these changes can have a significant impact on the dynamics during meetings.

 Cairney & Zahariadis (2016) emphasise two additional aspects related to parties being concerned
about being re-elected:

 Re-election concerns can mean parties will be more likely to accept proposals when it
concerns “issue areas which they ‘own’, are popular with the voters, and where they don’t
expect powerful interest groups opposition campaigns (Cairney & Zahariadis, 2016, p.
99)”. E.g. corporate taxation can be seen as a conservative topic and thus a more
conservative constellation of the Council might lead to an increased chance of taxation-
related policies being accepted. At the same time, any corporate taxation issue can be
expected to meet a significant amount of interest from interest groups.

 If governing parties see a problem’s existence as a danger to their re-election, they are
more likely to accept a proposal that deals with the issue (Cairney & Zahariadis, 2016).

 The ‘European political mood’ or the “climate of times (Zahariadis, 2008, p.518)” meaning not only

25
 public opinion, but also the perception of public opinion by decision-makers and the influence of
certain lobby and interest groups. While public opinion seems to have less influence on the EU
policy process, there does appear to be a general European mood where distinct trends can be
seen to impact decisions over a longer period of time.

(Ackrill et al., 2013; Cairney & Zahariadis, 2016; Zahariadis, 2008)

1.3.1.5 Additional aspects of the MSF

When these three streams converge, a policy window can open up, meaning the specific setting in which
policies can be adopted or an issue will be debated. These windows often open because of a “trigger (Ackrill
et al., 2013, p. 873)”, a change in one of the streams, or even multiple changes in different streams, that can
be sudden or predictable (Ackrill et al., 2013; Cairney & Zahariadis, 2016; Devos et al., 2009; Zahariadis,
2008).

These triggers will signal an entrance to the agenda for policy entrepreneurs, who can exploit them by trying
to couple streams together to form a decision. A policy window provides a stimulus for coupling, but does not
automatically result in a policy, because policy windows will be limited in time and can close again before a
decision has been made. Policy windows are also often unclear, they are estimates by the participants of the
policy process, dependent on their perception and influenced by the ambiguity and uncertainty of the policy
process (Ackrill et al., 2013; Cairney & Zahariadis, 2016; Devos et al., 2009; Zahariadis, 2008). While policy
windows will mainly open up independent of entrepreneurs, Zahariadis (2008) points out that there is also
potential to force open windows. A certain campaign or well-timed speech can for example act as a forced
trigger to bring issues to the agenda.

Policy entrepreneurs are not always very well defined in literature, but Zahariadis (2008, p. 520) makes one
clear distinction between policy-makers and “entrepreneurs who are power brokers who manipulate
problematic preferences and unclear technology and exploit the system’s fluid participation to push forth their
pet solutions. They do not decide on policies, policy-makers do.”

The idea of coupling plays a central role in the MSF, meaning the way entrepreneurs can package and frame
the streams and sell them to welcoming decision-makers in different institutions, using a multitude of strategies
(Cairney & Zahariadis, 2016).

Lastly, time cycles greatly affect the political process (Ackrill et al., 2013). Just consider the 28 different terms
of office of the Member States whose unanimous approval will be required to come to a decision on the
CCCTB.

From all the above it is clear that the MSF provides a lens which can help to explain the CCCTB’s policy
process and to assess if there is a chance of consensus on the CCCTB, or whether an agreement on the 2016
proposal is more or less likely to be reached.

1.3.2 Methodology and sources

The above literature review mainly includes secondary sources which discuss tax avoidance by multinationals
and sources which discuss the use of the MSF to study the EU policy process.

26
Furthermore, three groups of sources are being used:

Primary sources to establish and comprehend the basics of these policy processes: a vast array of proposals,
reports, communications, conclusions, etc. mainly publications by the European institutions. As the mere
volume of these documents can be daunting and since they did not always provide sufficient background or
critical reflections, the use of secondary sources was necessary. These helped to fill some of the gaps which
official EU documents leave. There are quite a few organisations, media outlets and scholars who follow EU
corporate tax policy, e.g. ICTD, Eurodad, EurActiv, Oxfam, BNA, Politico, FT, TJN, etc.

But even with those sources, it is sometimes difficult to discover all the intricacies of the subject at hand and
understand some of the dynamics playing. So to really get an in depth view and gain some more inside
knowledge, a series of interviews were conducted with individuals in some of the key institutions or groups
currently discussing the CCCTB proposal. By interviewing a number of EU officials, representatives of key
Member States and lobbyists, it was possible to gain a more complete picture. However, for various reasons
explained below, their quotes are not directly used in this paper.

The interviews described below are not in chronological order here, but were all taken between December
2016 and March 2017. The interviews can be divided in three groups:

 Individuals working within the EU institutions: one Member of the EP, one parliamentary assistant
to another MEP and one Commission official. Even though the first two were playing a central part
in the upcoming CCCTB in the EP, they had only started discussing the proposal, so they provided
no information that was not also publicly available. The Commission official however, contributed
a lot of interesting insights and information

 One fiscal attaché from the permanent representation of a Member State who is going to hold the
Council’s rotating presidency in the upcoming years. Though he is part of the discussions about
the CCCTB in the Council, he was not willing or able to shed any light on the ongoing discussions,
nor divulge any information that was not already publicly accessible. Because of this clear stance,
no further attempts were made to interview more officials at other permanent representations.

 Three representatives from interest groups. While one interview with two policy advisors from
Accountancy Europe – an umbrella group represents professional accountants, auditors, and
advisors – provided many insights, they asked not to be quoted (Accountancy Europe, n.d.).

 A last interview was with Tove Maria Ryding, Policy and Advocacy Manager with the NGO
Eurodad, a network of civil society organisations from 20 European countries which aims to
achieve, among other goals, tax justice (Eurodad, n.d.).

Besides the above, a roundtable about the CCCTB provided some interesting insights, as it was organised by
Financial Future, a high-level discussion platform led by a former German MEP (Financial Future, 2017).
However, it was held under Chatham House Rules.

As a final note: only sources that were published before 31st of July 2017 are included.

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1.3.3 Limitations of this study
A main limitation of the MSF is that it is developed as mainly a tool for studying agenda-setting and does not
necessarily have predictive powers, although we do have the possibility to compare two CCCTB proposals.
As they have very clear differences in content and setting, the MSF can serve as a framework to compare the
different elements of the CCCTB and assess its chances.

One limitation of the source-material is that much of the literature on UT and corporate tax avoidance comes
from a relatively small group of researchers, many of whom can be considered tax justice activists and/or
linked to NGOs like TJN. An additional pitfall is that parts of this thesis mainly rely on media reports or other
indirect sources when discussing recent developments.

A further challenge is that the current CCCTB proposal was launched less than a year ago and many of the
discussions about it are still in their initial phases. Therefore, many factors are uncertain and the outcomes are
not known. However, there have been some leaks and public declarations that do give some insights and allow
us to compare the new proposal’s chances to that of 2011.

Finally, the main challenge, for any research on taxation policy in the EU, is that key decisions are prepared
and made within the Council and its subsidiaries like the Code of Conduct Group, of which hardly any records
are published. Little information flows out of that black box, except when decisions have been taken and even
then is it almost impossible to reconstruct the discussions that have preceded. Hence, any study like this one
is limited due to a lack of data. But that is also why the CCCTB’s case presents a unique opportunity to make
a comparison between the two proposals and assess which strategies and circumstances might prove more
successful.

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2 THE 2011 CCCTB’S POLICY PROCESS

2.1 Problem stream

The 2011 CCCTB was primarily addressing the same problem which the Commission has been attempting to
tackle for decades: having many different national taxation systems creates tax obstacles which hinders the
functioning of the internal market. To a lesser extent, and particularly since 2008 and the subsequent crises,
the Commission has also adopted the CCCTB to tackle a second problem: harmful tax competition between
Member States which also prevents the well-functioning of the single market through tax revenue losses (Pîrvu,
2012).

The Commission managed to position the CCCTB as an instrument to improve the functioning of the internal
market while emphasising how a CCCTB would be good for business and economy. Eventually, the Barroso
II Commission managed to position the CCCTB as a central part of the Europe2020 strategy for growth
(European Commission, 2011c; Pîrvu, 2012; Ruding, 2012).

2.1.1 Tax obstacles for businesses prevent the well-functioning of the Single
Market
According to the Commission, the existence of Member States’ (now 28) different national tax regimes, causes
market distortions in the form of (risks of) double taxation and high administrative and compliance costs for
companies conducting business in multiple Member States. The Commission’s aim has been to stimulate
growth and job creation by making doing business in the EU “easier and cheaper (European Commission,
2011c).” This internal market and pro-business rhetoric about the role of tax policy in the EU’s agenda for
growth comes back time and again in the years and even decades leading up to the 2011 proposal. As shown
below, this is especially the case in crucial Commission strategy documents and in the rhetoric of subsequent
Commissioners.

Pîrvu (2012) lists many earlier examples of the former, like the Neumark Report, the Commission’s 1975 action
programme in the field of taxation, the 1992 Rüding Report, etc. This internal market focus was also clear from
the Commission’s 2001 corporate tax strategy and accompanying study, which included the first formal
mention of the CCCTB (European Commission, 2001a, 2001b). On the one hand, the documents confirmed
that the Commission’s first priority was to remove tax obstacles caused by still having different national tax
regimes within the single market (Martens Weiner, 2002). For example, see the strategy’s title as further proof:
“Towards an Internal Market without tax obstacles (European Commission, 2001b, p.1).” Second, both
documents are clearly business focused, as summarised in one of its main objectives: “providing EU
businesses with a consolidated corporate tax base for their EU-wide activities (European Commission, 2001b,
p.20).”

The internal market and business focus comes back frequently between 2001 and 2011 in for example the
Lisbon and Europe2020 strategies. The Commission regularly linked the Lisbon Strategy to the CCCTB,

29
claiming that taxation was central in creating a framework for the EU to become the most competitive economy
in the world (Euractiv, 2007; European Commission, 2001b, 2006). Similarly, the Europe2020 Strategy wants
to “tackle bottlenecks in the single market by […] removing tax obstacles (European Commission, 2010, p.21)”
in order to make “tax systems more “growth-friendly” (European Commission, 2010a)”. These same goals can
be found in the Commission’s 2010 Annual Growth Survey (European Commission, 2010b) and the Council’s
Pact for the Euro (European Council, 2011), while the 2011 Single Market Act highlighted the costs businesses
would save if tax obstacles would be removed (European Commission, 2011a).

The same focus can be found in comments made by previous Taxation Commissioners, e.g. Commissioner
Kovacs in 2006 and 2007 (Euractiv, 2006, 2007), or Commissioner Šemeta at the launch of the 2011 CCCTB:
“When it comes to corporate taxation, there are still serious obstacles to the Single Market which are holding
businesses back. […] Today's proposal is good for business and good for the EU's global competitiveness.
(European Commission, 2011c)”

2.1.2 Harmful tax competition between Member States as a barrier for the well-
functioning of the Single Market
Since at least 1997, the Commission has emphasised that harmful tax competition is a barrier for the proper
functioning of the Single Market, though “tax competition in itself is generally to be welcomed as a means of
benefiting citizens and of imposing downward pressure on government spending (European Commission,
1997, p. 2),”. That same report underlined how harmful tax competition makes an overall reduction of the tax
burden more difficult because Member States’ will struggle to reduce budget deficits. According to the
Commission, unrestrained tax competition limits “Member States' freedom to choose the appropriate tax
structure, including by broadening the tax base and lowering the rates (European Commission, 1997, p. 2).”

This secondary problem only truly gained significance, once the 2008 financial crisis and subsequent 2010
sovereign debt crisis started harming the EU, which combined with an economic crisis also slowed down
growth in the EU (Dayle Siu et al., 2017). These crises brought abrupt decreases in corporate tax revenue for
large and high-tax Member States like France and Germany (Appel & Block, 2015). The drew significant
attention to the negative effects of harmful tax competition on the functioning of the internal market (Pîrvu,
2012).

Because of this, the Commission found allies in France and Germany, who as part of their ‘Competitiveness
Pact’, proposed the CCCTB as a way to diminish the costs of tax competition in the Eurozone (Euractiv,
2011a). Despite these efforts, this remained a secondary argument for the Commission, which might have
been an intentional move on their part to sell the CCCTB to those Member States with special tax regimes
who tend to be more reluctant towards tax harmonisation.

2.2 Policy stream

As mentioned already, ideas and proposals for European tax harmonisation have been circulating since at
least 1962 (Pîrvu, 2012). That the formulation of formal proposals took such a long time was caused by two

30
main obstacle. First, the Commission has struggled with the “technical feasibility (Zahariadis, 2008, p. 518)” of
working out a proposal acceptable to Member States with a vast range of tax systems (Pîrvu, 2012).

Second, while Member States have historically been hesitant to accept EU-level tax harmonisation (Pîrvu,
2012), the obstacles for the “value acceptability (Zahariadis, 2008, p. 518)” of the CCCTB are definitely high.
The CCCTB would drastically change corporate taxation in the EU and likely have a big, albeit somewhat
unclear, impact on the economies and budgets of Member States. It is not surprising that minds in both the
Commission and Council were slow in opening up to even discussing a form of harmonisation of the tax base.

The policy journey of the CCCTB starts with the 1990 independent tax expert committee which published the
so-called ‘Ruding Report’ 3 in 1992 (Commission of the European Communities, 1992). One of the many
possible measures which the report proposed were: “common rules for a minimum tax base, so as to limit
excessive tax competition between Member States intended to attract mobile investment or taxable profits of
multinational firms (Commission of the European Communities, 1992)”. Noteworthy is that the Ruding Report
also clearly stated that formulary apportionment was not an option for the EU at that point (Martens Weiner,
2002). The report seems to balance the subsidiarity principle, along with Member States’ different tax revenue
needs, with proposing solutions which need to be organised “at Community level (Commission of the European
Communities, 1992).”

Progress in the field of corporate taxation was slow during the 1990s, with the Commission mainly continuing
to make the same arguments it had been making in the preceding decades. The most significant form of
progress came when the Commission and Council developed a non-binding Code of Conduct for Business
Taxation, which was presented in 1997 and signalled the start of the above-mentioned Code of Conduct Group
(Pîrvu, 2012).

The breakthrough came when the Group’s work coincided with two other trends at the end of the 1990s:
increased taxation-related activism by the European Court of Justice and stricter application of state aid rules
by the EC. These three processes resulted in a policy window to kick off more in-depth discussions about
closer coordination of corporate tax in the EU (Dayle Siu et al., 2017).

This policy window resulted in the idea for a CCCTB being officially voiced for the first time by the Commission
in the above-mentioned 2001 corporate taxation strategy and study. The study, requested by the Council,
presents four different options for harmonising the tax base, including a CCCTB4 (European Commission,
2001b, 2001a). Broadly speaking, all four possibilities used some form of “consolidated taxation with formulary
apportionment (Martens Weiner, 2002, p. 10)”, which can be seen as quite a big departure from the
Commission’s work in the 1990s. In the strategy, the Commission communicated its intend to have a broader
debate on corporate taxation in the EU (European Commission, 2001b).

The Commission presented its conclusions in 2003, after the idea of a CCCTB had received endorsements
from many experts and businesses during the years in between (Pîrvu, 2012). They confirmed that a CCCTB

3 Named after the Chairman of the Committee of Independent Experts on Company Taxation, Mr. Onno Ruding

4 Then still called common consolidated base taxation

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had become the main long-term objective, but acknowledged that progress had been slow due to “reluctance
by Member States” and “technical difficulties (European Commission, 2003, p. 26).”

Following a positive discussion of a Commission non-paper on the CCCTB at an informal ECOFIN meeting in
2004, most Member States agreed that working towards a CCCTB was a viable option. A formal Council-
Commission CCCTB Working Group was set up to develop the technical aspects of a proposal (Dayle Siu et
al., 2017; European Commission, 2006, n.d.-a; Picciotto, 2012). The EP and the European Economic and
Social Committee (European Commission, 2006) endorsed the CCCTB in 2005 and 2006 respectively, but
progress remained slow.

The Commission issued progress reports in 2006 and 2007 (Euractiv, 2006; European Commission, 2006,
2007), again endorsing the CCCTB as a much-needed “comprehensive approach (Pîrvu, 2012),” while setting
the goal of a proposal by 2008 (Euractiv, 2007; G. Parker, 2005). Clearly, this timeline did not work out and
after another consultation process with Member States and stakeholders, the Commission finally announced
the launch of a CCCTB proposal by early 2011 (European Commission, 2010c, n.d.-b).

2.2.1 The 2011 CCCTB Proposal

The 2011 “Proposal for a Council directive on a Common Consolidated Corporate Tax Base (CCCTB)
(European Commission, 2011b)” would have established a common set of rules for calculating the tax base of
an MNC and then divide that tax base according to a weighted formula of one-third each for sales, labour (half
payroll and half headcount) and assets including intangibles5. For MNCs, this would mean filing one tax return
for all of their EU-based activities, which would then be divided according to the formula and taxed according
to the different rates of Member States. The proposal followed a ‘stop at the water’s edge’ approach, by only
requiring that EU-based activities be included (Picciotto, 2012; Pîrvu, 2012).

The Commission proposed an optional CCCTB, though there had been discussions about other options like a
CCTB without formula apportionment or making the CCCTB obligatory (Pîrvu, 2012). Two (or rather 28+1)
parallel corporate tax systems would have continued to exist, with companies relatively free to use the CCCTB
or the different national tax systems. Once signed up for the CCCTB though, they would have to use it for at
least five years and then only have an opt out every three years (Picciotto, 2012).

While the proposal clearly followed some of UT’s main features like a combined report, profit apportionment
and included a resolution procedure (Pîrvu, 2012), it also diverted UT’s ideal version, which drew criticism to
the proposal:

Its optionality reflected the pro-business emphasis of the proposal and was criticised for giving MNCs a chance
to benefit from whichever system best suited their tax planning needs. This duality, where the national systems
exist alongside the CCCTB, would likely have meant an increase of administration costs for Member States.
Secondly, the water’s edge approach instead of worldwide reporting (or even apportionment), would have
allowed MNCs to shift profits outside the EU (Picciotto, 2012). Thirdly, the CCCTB proposal also tries to

32
calculate intangible assets by including costs for R&D, marketing and advertising. The Commission aims to
use readily available data and wants to set up a system that can check records six years back in order to limit
possibilities for manipulation (A. Parker, 2016).

Despite this criticism, the first CCCTB proposal can rightfully be regarded as a “first attempt to make progress
in an area as controversial as the convergence and harmonization of the corporate tax base in the EU (Pîrvu,
2012, p.137).”

2.3 Politics stream

There have been three political turning points for the CCCTB proposal. First, the switch of strategy by the
Commission in the early 1990s, away from more radical proposals of the 1980s to a more subsidiarity-based
approach. Second, the above-mentioned window for tax harmonisation discussions created in the late
1990s/early 2000s, resulting in the establishment of the CCCTB Working Group in 2004. Third, the final trigger
arrived with the different crises that hit the EU and its Member States after 2008. While the CCCTB had already
been in the Commission pipeline long before these crises, it gave the final push for the proposal in three ways:

First, when the sovereign debt crisis hit several low-tax Member States hardest, especially Ireland, other
Member States like France and Germany used the needed bailouts as leverage to increase “Ireland’s
willingness to participate actively and constructively in the EU tax base harmonization effort. (Appel & Block,
2015, p. 118)”

Second, after the crises, the Barroso II Commission managed to couple the CCCTB to the Europe2020
strategy. While the CCCTB is not quoted in the strategy, it fits within Europe2020’s double goal of making “tax
systems more "growth-friendly (European Commission, 2010a, p. 26)” and removing tax obstacles as part of
the Commission’s Smart Regulation agenda (European Commission, 2010a). Similarly, the CCCTB proposal
was coupled to the Euro Plus Pact as a possible way to strengthen public finances through taxation policy
(European Council, 2011).

Perhaps the biggest crisis-related change was one in the minds of leaders. The sudden pressure on
government revenues due to the crises forced them to consider new options like tax (base) harmonisation and
the CCCTB. Public pressure and media attention significantly added to what was a brief policy window for tax
related policy (Appel & Block, 2015).

From all the above, it is rather clear that the Commission was the main driver of the CCCTB proposal. Through
its reports and rhetoric, the Commission has, for decades, pushed for EU-solutions for the tax obstacles
preventing the well-functioning of the Internal Market. The Commission’s stubbornness – showcased by the
long list of reports, communications, strategies and studies – is rather impressive, especially considering the
long opposition of certain Member States to harmonised tax rules and the unanimity required to adopt tax-
related proposals in the Council (Pîrvu, 2012).

The influence of the EP is limited by treaty, as the EP only needs to be consulted. Nevertheless, the EP was
a political ally of the Commission, favouring the CCCTB (Appel & Block, 2015; European Commission, 2015c;
Pîrvu, 2012). The EP had given political support to the CCCTB project through two resolutions long before the

33
formal consultation started. The EP’s 2005 resolution on the CCCTB endorsed the Commission’s efforts and
gave clear policy recommendations, while its 2008 resolution on tax treatment in cross-border situations again
urged the Commission to forward towards a CCCTB proposal (European Parliament, 2005, 2008).

Amongst the Member States, France and Germany have been the main drivers of the CCCTB project since
the late 1990s (Euractiv, 2011a; Eurodad, 2015a; G. Parker, 2005; Picciotto, 2012; Pîrvu, 2012).

On the other side, Ireland, Luxembourg, the Netherlands and the UK have been the CCCTB’s main opponents,
often out of fear that harmonising the tax base is a slippery slope towards tax rate harmonisation, despite the
Commission repeatedly denying such an intention (Euractiv, 2006, 2007, 2011a; Eurodad, 2015a; G. Parker,
2005). These four were reinforced after 2004, by a group of new Member States who can generally be seen
to be less in favour of further tax harmonisation: Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Malta, Poland and Slovakia all spoke out against or voiced strong reservations about the CCCTB
project in the years before (and sometimes after) 2011 (Euractiv, 2011b; Eurodad, 2015a; G. Parker, 2005;
Picciotto, 2012; Pîrvu, 2012). It is important to note though that opinions can of course change with national
governments, as happened for example with Slovakia (Euractiv, 2005) and even Germany (Eurodad, 2015a).

But discussions on tax harmonisation continued, which can mainly be explained by France, Germany and the
Commission’s vocal support for tax harmonisation. Adding pressure in the years right before and after the
2011 proposal, a large group of business representatives came out in favour of the CCCTB project, though
not always unconditionally (Pîrvu, 2012).

2.4 Reactions to the 2011 CCCTB proposal and aftermath

After the launch of the CCCTB proposal in March 2011, it was discussed for several years, but got stuck in
negotiations in the Council and made little visible progress.

After the proposal was presented, the main actions undertaken were an EP consultation of the draft, which
produced proposals for significant amendments (Picciotto, 2012), as well as several round of discussions
within the Council (European Parliament, n.d.-b). Additionally, but less significant and hence not further
discussed here, the Economic and Social Committee and the Committee of the Regions issued opinions on
the proposal (European Parliament, n.d.-g).

2.4.1 European Parliament’s support for the CCCTB proposal

As a long-time supporter of the CCCTB, the EP again supported the proposal in its legislative resolution in
April 2012. This was only after a debate involving more than 500 amendments. 38 were adopted, of which
really two would have a significant impact:

While the Commission had made the CCCTB optional for all companies, the EP passed an amendment that
would make the CCCTB compulsory for most MNCs within two to five years, with an opt-out option for SMEs.
The EP also proposed to change the apportionment formula, from an equal three-way split between assets,
sales and labour to a weighting of only 10% for sales and 45% each for the other two. The amendment to the

34
formula is interesting, as it favours countries where goods are produced, while disfavouring larger high-tax
countries with big domestic markets like Germany and France.

Because of the EP’s consultative role on taxation policy, the Council can choose to ignore any amendments
by the EP. However, the EP discussions brought substantial attention to the CCCTB debate and pressured
the Council towards adopting the CCCTB (Appel & Block, 2015; Picciotto, 2012).

2.4.2 National Parliaments and Member States

As part of the legislative procedure since the Treaty of Lisbon, the EU also needed to gather reasoned opinions
on the subsidiarity and proportionality of its proposals from the national parliaments of the Member States.
One-third of Member States could use these reasoned opinions as a yellow card to stop or delay the legislative
process, but that is uncommon. Although there were several ‘yellow cards’, the CCCTB’s opponents were still
short of the required threshold (Appel & Block, 2015), but their comments can give a sense of the opinions
towards the CCCTB in those Member States.

The parliaments of the UK, the Netherlands, Ireland, Malta, Sweden, Poland, Slovakia, Romania and Bulgaria
all submitted reasoned opinions, with the Czech Republic also still submitting comments after the deadline
(Pîrvu, 2012). The main issues raised by Member States’ national parliaments were:

 Having both the CCCTB and (at that point) 27 national tax systems existing alongside each other
would result in increased implementation costs, making the system more complicated, rather than
easier.

 The CCCTB and especially the formula for apportionment would have a large and disproportionate
budgetary impact on some Member States.

 The new rules of the CCCTB would be a source of uncertainty for many companies.

 The proposal (or at least some parts of the proposal) does not respect subsidiarity, as Member
States are better placed than the EU to assess the taxation policy needed to reach their economic
and political objectives (Pîrvu, 2012).

Additionally, Denmark’s and Slovenia’s parliaments stated they could not give a final opinion yet, asking for
further discussions. The responsible parliamentary committees of Italy, Belgium and Spain came out in favour
of the proposal. The Portuguese Parliament did not give a clear opinion either, but stated that the CCCTB was
not in conflict with the subsidiarity principle.

The CCCTB’s long-time supporters France and Germany, again endorsed the CCCTB at a Franco-German
summit in August 2011, where Chancellor Merkel and President Sarkozy urged Member States to finalise their
discussions by late 2012, pushing for a fast compromise (Pîrvu, 2012).

35
2.4.3 Council discussions on the CCCTB
There were from the beginning a number of Member States who were very hesitant about, or even openly
opposed to the CCCTB project. Nonetheless, this did not stop the Council and its preparatory bodies from
discussing the proposal.

A first reading of the whole proposal was completed during the Cypriot Presidency (second half of 2012), but
it was only during the Irish presidency (first half of 2013) that visible progress was made in the form of a CCCTB
Roadmap and a compromise proposal (Council of the EU, 2013; Irish Presidency of the Council of the EU,
2013). The role of Ireland here is rather remarkable, as the Irish government, backed by Irish businesses, were
among the first to publicly oppose the proposal (Euractiv, 2011b). This can partially be explained by the
pressure the Irish government had been under since the bailout, which it had needed because of the sovereign
debt crisis (Appel & Block, 2015). Another explanation is that Ireland wanted to be publicly seen as cooperating
on taxation at the EU-level, as they have done publicly in recent years. This has not stopped them from
opposing tax harmonisation in the more private setting of the Council, nor from simply replacing one
controversial or harmful tax rule for another (Weyzig, 2015).

Based on discussions of the presidency with Member States, the Roadmap proposed a two-step approach,
which basically meant that issues related to the common base would be discussed as a first step, while the
consolidation or formula apportionment would be discussed as a second step. The Roadmap was endorsed
by the ECOFIN Council and this two-step approach has been the basis of all future discussions of the CCCTB,
including the 2016 CCCTB proposal (Council of the EU, 2013; European Parliament, n.d.-b).

Proceeding presidencies continued on that basis, with the Lithuanian (second half of 2013) and Italian (second
half of 2014) presidencies making compromise proposals. But all compromises were mainly focused on the
first step, because negotiations on consolidation were apparently entirely unsuccessful (Italian Presidency of
the Council of the EU, 2014; Lieb, 2016; Lithuanian Presidency of the Council of the EU, 2013).

In the end, there was no political will to reach a compromise on a complex and somewhat revolutionary
proposal like the CCCTB, with Member States like Ireland and the UK openly opposing the proposal, despite
the brief policy window for tax harmonisation after the crises (Garside, 2016; Stearns, 2016).

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3 THE 2016 CCCTB’S POLICY PROCESS

3.1 Problem stream

As mentioned above already, the 2011 CCCTB proposal was proposed primarily as a solution to tax obstacles
hindering the functioning of the Single Market, while tackling tax competition took a secondary role (see 2.1.1).
This had shifted dramatically by 2016, as the main problem driving the 2016 proposal was corporate tax
avoidance. The press release at the launch of the 2016 proposal exemplified this additional focus by
referencing the original aims of the 2011 CCCTB, improving the Single Market for businesses and supporting
growth and investment in the EU, as well as wanting to tackle tax avoidance by MNCs (European Commission,
2016b).

Looking back briefly, it is interesting to note that there was very little focus on the problem of corporate tax
avoidance in the 2011 proposal. Tax avoidance is not quoted directly in the proposal, and only vaguely touched
upon when arguing that the CCCTB has the potential to reduce “unintended tax planning opportunities for
companies (European Commission, 2011b).”

In the years leading up to the proposal, a series of tax scandals have acted as international focusing events
resulting in much attention for the problems linked to tax competition between Member States, chiefly large-
scale corporate tax avoidance. This coincided with a wider narrative of increased European attention for
growing financial inequality (or variations in policy-relevant indicators) as a response to the EU’s austerity
politics which had followed the different financial and economic crises since 2008.

3.1.1 Inequality and corporate tax avoidance

Since the financial crisis of 2008, public attention has been focused on the role of financial regulations in
creating a more sustainable economic system. Researchers have also started to focus more on the link
between the crises and rising inequality, by looking at “the role of political-economy factors (especially the
influence of the rich) in allowing financial excess to balloon ahead of the crisis (Ostry, Berg, & Tsangarides,
2014).”

In recent years, publications like Thomas Piketty’s ‘Capital in the Twenty-First Century’ and Zucman et al.
(2015) have amplified the debate about financial inequality and the link with tax avoidance and evasion. Their
work has highlighted how tax avoidance and evasion are “key drivers of rising global inequality (Piketty in
International Consortium of Investigative Journalists, 2015)” and pose “a major threat for our democratic
institutions and our basic social contract (Piketty in International Consortium of Investigative Journalists,
2015).”

These ‘variations in policy-relevant indicators’ have been used by the Commission and Tax Justice
campaigners to highlight the negative effects of tax avoidance by MNCs and the role tax policy like the CCCTB
can play in tackling these problems. At the same time, policymakers have turned their attention to the problems
arising from the loss of tax revenue due to tax avoidance and evasion (Cobham & Janský, 2015).

37
Perhaps feeling the rising tide, the European Council reacted to these trend already in their March 2012
meeting, when it called on the Commission to develop concrete measures to tackle tax fraud and evasion, as
well as to carry forward the discussions on the proposal for a CCCTB (European Council, 2012). Interestingly,
this call for measures against tax evasion was later interpreted broadly by the Commission and used to tackle
tax avoidance (Peeters & Seré, 2016).

3.1.2 Tax scandals

What really brought the campaign against tax avoidance and evasion to the forefront of taxation discussions
in the EU were a series of large tax scandals. As international focusing events, they have highlighted how
MNCs are using the different mismatches between different tax regimes of Member States to avoid taxes on
a large scale.

At first, those reports were generally limited to single MNCs and Member States, or small groups, for example
Neville (2012) exposing that Starbucks had been paying almost no tax on their UK profits. The tax scandals
series really exploded on an international scale in November 2014, when the International Consortium of
Investigative Journalists (ICIJ) and its international media partners started publishing confidential documents
on hundreds of tax rulings by Luxembourg.

The ‘LuxLeaks’ were based on data ICIJ had obtained from an employee of tax consulting firm
PricewaterhouseCoopers and gave the public insight into hundreds of secret deals between MNCs and the
Luxembourg tax authority. These allowed MNCs to significantly cut their effective rates through complicated
legal and financial structures, set up precisely for tax purposes and with the approval of Luxembourg
(International Consortium of Investigative Journalists, 2014). It started a streak of tax scandals revealed by
ICIJ: PanamaPapers, SwissLeaks and BahamaLeaks followed (International Consortium of Investigative
Journalists, 2015, 2016a, 2016b).

Many Member States were linked to the scandals (Nielsen, 2016), but LuxLeaks especially focused attention
on large-scale corporate tax avoidance within the EU and since then, European politicians have been under
pressure to close loopholes for corporate tax avoidance (Brunsden, 2017).

The Commission has since argued that, through mismatches between tax regimes and the specific design of
some national tax systems, Member States have been attracting businesses by encouraging MNCs to shift
their profits away from other Member States’ jurisdictions to their own, allowing MNCs to avoid taxes along the
way (European Commission, 2015a).

This rhetoric about wanting to tackle corporate tax avoidance through the CCCTB comes back repeatedly in
the Commission’s rhetoric about the 2016 CCCTB (Brunsden, 2016; De Morgen, 2016; Eriksson, 2016)
Furthermore, the Commission has used these scandals to once again highlight the negative effects of tax
competition. In the lead up to the new proposal, the Commission argued that “because of the increased mobility
of certain taxpayers and capital, tax competition between Member States has further intensified. (European
Commission, 2015a, p. 13)”

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3.2 Policy stream
While the 2011 CCCTB proposal had become stuck in negotiations by November 2014, one can see a surge
in EU-level policy initiatives aimed at tax avoidance and evasion after LuxLeaks.

From 2013 onwards, most of the EU’s corporate tax policy attention was turned to the international negotiations
that were part of the OECD’s BEPS process. Although this changed in late 2014, after the public outcry over
LuxLeaks was a trigger to a policy window for corporate taxation reforms. Several corporate tax proposals
have been made and adopted since (Peeters & Seré, 2016). With different proposals, the Commission has
tried to “provide for a coordinated policy response (European Commission, 2015a, p. 13)” to the tax scandals.

The first policy reaction by the Commission was to propose to make the automatic exchange of tax rulings
compulsory (European Commission, 2015a; Gotev, 2014a), a part of a Tax Transparency Package in March
2015. It was adopted in December 2015 already (European Parliament, n.d.-a, n.d.-e). Further using the
momentum provided by the tax scandals, the Commission stepped up their tax gears and announced in
January 2015 that it was committed to “reviving its proposal for a common consolidated corporate tax base
(Vestager & Moscovici, 2015)”. The Commission also declared it would be tabling a new action plan on
corporate taxation later in summer 2015 (European Commission, 2015a).

Despite a clear lack of progress on the CCCTB in the years before, the Commission did not immediately
withdraw the old proposal, as several parts of it were also being discussed as part of the BEPS process (e.g.
the definition of permanent establishment). So while the BEPS process was being concluded, the Luxembourg
Presidency (second half of 2015) proposed to split off some of the BEPS-related provisions of the 2011 CCCTB
into an anti-BEPS directive, which was accepted by the other Member States (Luxembourg Presidency of the
Council of the EU, 2015).

When the Commission’s Action Plan was launched in June 2015, the plan for a CCCTB re-launch was its most
central part, with two other big chunks of the action plan focused on the translation of the BEPS outcomes into
EU legislation (European Commission, 2015b, 2015d).

Several smaller parts of those BEPS outcomes, were proposed in one Anti-Tax Avoidance Package in January
2016, including the Anti-Tax Avoidance Directive (ATAD) containing the BEPS-related provisions from the
2011 CCCTB proposal. ATAD was adopted by the Council in June 2016, remarkably quick (Council of the EU,
2016).

A second big outcome of the BEPS process and closely related to the CCCTB, were the proposals for Country-
by-Country Reporting (CbCR) and public CbCR. CbCR is essentially the same basic idea as UT’s CaCbCR
(see 1.2.8.3). BEPS Action 13 proposed that large MNCs, those with an annual revenue of more than 750
million euro, would be obliged to file a CbC report with tax authorities (Remeur, 2017). Unlike CaCbCR, the
BEPS CbCR does not make the information public. The EU already has CbCR for banks since 2015 (Aubry &
Dauphin, 2017) and has adopted the OECD’s proposal for CBCR as part of the BEPS process by including it
in the 2016 ATA Package.

The Commission has now also proposed public CbCR which goes beyond the BEPS recommendations by
making most of the data of the EU’s CbCR available to the public, instead of only to tax authorities, realigning
39
it with CaCbCR. Adoption of public CbCR should be easier than the CCCTB, because it considers accounting
instead of taxation policy, so it can be decided upon following the ordinary (co-decision) legislative procedure
(Remeur, 2017).

Finally, on 25th of October 2016, the Commission proposed a Corporate Tax Reform Package including the
re-launch of the Common Consolidated Corporate Tax Base (CCCTB) (European Commission, 2016a). The
package also contained an amendment to ATAD focused on hybrid mismatches with third countries. ATAD 2
was again swiftly adopted by the Council in February 2017 (Council of the EU, 2017). A third part of the
package was a proposal for an EU double-taxation dispute resolution mechanism. Such a mechanism would
remedy the problems with current bilateral dispute mechanisms and would become unnecessary once the
CCCTB has been adopted, but has been proposed by the Commission as an intermediary solution. The
Council has already reached a compromise on the proposal and is now awaiting an EP opinion before formal
adoption (European Parliament, n.d.-f).

3.2.1 The 2016 CCCTB Proposal

Though the core of the CCCTB proposal has stayed the same, there are a number of differences between the
two CCCTB proposals, listed below.

Firstly, the two-step approach to the CCCTB, which was introduced by the Irish Presidency in 2013 (Council
of the EU, 2013), has become an integral part of the proposal. This also means that there are formally two
proposals: a CCTB which deals with the common tax base and a CCCTB which adds formula apportionment
or consolidation to the CCTB. This also means that a CCTB could be introduced without the second step
(European Commission, 2016c).

Secondly, the CC(C)TB6 has been made compulsory for MNCs which have more than €750 million in total
global revenue, while remaining optional for other companies (European Commission, 2016c). This can be
explained from three angles. First, the Commission seems to have followed the EP’s 2012 recommendation
to make the CCCTB compulsory for bigger companies (Appel & Block, 2015; Picciotto, 2012). Secondly, the
€750 million is clearly the same as the BEPS’ CbCR threshold (Gimdal, 2017; Remeur, 2017). Thirdly, this
also makes sense for anti-tax avoidance reasons. It prevents large MNCs from choosing whatever system
best fits their tax planning needs and closes off many opportunities for tax avoidance (European Commission,
2016c).

Thirdly, the CC(C)TB proposal also includes a super-deduction for research and development, with smaller
companies receiving an even higher super-deduction for R&D (Gimdal, 2017). This is clearly a “sweetener” for
businesses, compensating for making the CC(C)TB obligatory. It also compensates several Member States
for losing their patent box regimes because of the CCCTB (Kirwin, 2016b).

Finally, the 2016 CC(C)TB introduced an ‘Allowance for Growth and Investment’, which seems to be an EU
version of the often criticised Belgian and Italian notional interest deduction regimes (Ernst & Young Global

6 CC(C)TB refers to the CCTB and CCCTB

40
Limited, 2017), though with some alterations and with the aim of ending the current debt-bias of companies in
the EU. (Haeck, 2016; Oxfam International, 2016; Oxfam International & Esmé Berkhout, 2016; Stearns,
2016). By giving companies the same benefits for equity as they already have for debt, the allowance aims to
remedy the current debt-bias in taxation. It effectively links the CC(C)TB to the Commission’s Capital Markets
Union initiative and making it another favour to businesses (European Commission, 2016c).

3.3 Politics stream

To best understand why the Commission has now re-launched the CCCTB as an anti-tax avoidance measure,
one also needs to have a look at the political setting, the politics stream, surrounding this proposal. The next
section deals with how factors like the (perceived) European mood and pressure by NGOs, media and the EP
have led to the CCCTB’s re-launch.

3.3.1 A European mood favouring taxation reforms

Until November 2014, the negotiations for the CCCTB had stalled. Partially because most of the EU’s attention
had turned to the EP elections of May 2014 and subsequent formation of a new Commission. When Jean-
Claude Juncker, then candidate President of the Commission, announced his priorities for the upcoming term
in July 2014, taxation policy was mentioned as a way to make the internal market deeper and fairer. Juncker
came out in favour of “the adoption at EU level of a Common Consolidated Tax Base and a Financial
Transaction Tax (Juncker, 2014).” With negotiations on the CCCTB at a standstill, this was not very meaningful
until LuxLeaks became a political turning point during the new Commission’s first week in office in November
2014.

Luxembourg was holding the rotating presidency of the Council for the second half of 2014 and was Juncker’s
home country. At the centre of the scandal were tax rulings by Luxembourg’s tax authorities between 2002
and 2010. This put enormous pressure on Juncker, as he had been Prime Minister of Luxembourg for all, and
Minister of Finances for most of the that time (Brunsden, 2017; International Consortium of Investigative
Journalists, 2014).

During the weeks after the affair came out, calls for Juncker to resign were launched, resulting in an
unsuccessful censure motion in the EP (Gotev, 2014c). Fending off the attacks by arguing that the rulings
were legal, Juncker was still forced to admit LuxLeaks “doesn’t correspond to the notion of fiscal justice (Gotev,
2014a).” Ironically, Juncker claimed the methods – tax rulings, complex legal structured and profit shifting –
were the result of a lack of tax harmonisation in the EU (Gotev, 2014a, 2014b) which he had blocked while in
charge of Luxembourg (Bowers, 2017).

Already in the first days after the scandal broke, it became clear that Juncker and the Commission were under
enormous pressure to act. Their first initiative to make the automatic exchange of tax rulings compulsory
(Gotev, 2014a) and in the same month, Juncker also made clear that the Commission wanted to re-launch the
CCCTB to break open the deadlocked negotiations (European Commission, 2015e). The European Council in
December 2014 spoke of “an urgent need to advance efforts in the fight against tax avoidance and aggressive
tax planning, both at the global and EU levels.”
41
Clearly, after the public outcry over LuxLeaks, the Commission wanted to step up their anti-tax avoidance
efforts and announced at the beginning of 2015 that “this is the year for Europe to put its tax house in order
(Vestager & Moscovici, 2015).” As the Commission acknowledged, the political situation had clearly changed,
with Member States even changing their political standpoints, because they too were under public pressure to
“intensify the battle against tax evasion and avoidance (European Commission, 2015a).”

3.3.2 The key role of tax justice campaigners and media

When looking at the discussions about corporate tax avoidance, one cannot ignore the central role which
NGOs who focus on tax justice have played in recent years. TJN, Eurodad, Transparency International, Oxfam,
etc. are closely monitoring taxation policy on the EU level and highlighting tax avoidance and evasion through
their work. Using (social and traditional) media to amplify their message, their campaigns and reports raise
public interest about and pressure elected officials to act against corporate tax avoidance. In many ways, they
have been acting as de facto allies of those proposing tax harmonisation for the EU (Eurodad, 2016).

The potential impact of Tax justice campaigners’ on the political agenda has already been demonstrated in
Lesage & Kaçar (2013)’s case study on the political journey of the idea for CbCR. Of course the CCCTB case
is not identical, as the idea did not originate with NGOs, but their influence has been very clear throughout the
2016 CCCTB’s policy process.

3.3.2.1 Media raising public pressure by reporting on tax scandals

The above-mentioned tax scandals were all brought to light by NGOs, albeit one that gathers journalists from
across the world: ICIJ. Since releasing LuxLeaks, ICIJ have had a remarkable tax reporting streak, bringing to
light several more international tax scandals. They have brought an enormous spotlight onto tax avoidance
and evasion and all had clear links to the EU, bringing about increasingly strong public pressure on political
actors.

ICIJ released SwissLeaks just a few months after LuxLeaks, bringing to light the murky deals of major bank
HSBC, until then shielded by Swiss banking secrecy. It showed how HSBC helped clients to avoid taxes on
e.g. the EU’s European Savings Directive (International Consortium of Investigative Journalists, 2015).

In April 2016, the ICIJ’s Panama Papers reports showed how politicians and other public officials have been
using offshore entities and secrecy in tax havens to shuffle around funds and profits (International Consortium
of Investigative Journalists, 2016a). The reporting not only won a Pulitzer Prize (International Consortium of
Investigative Journalists, 2017), but it also prompted the establishment of a special inquiry committee in the
EP (European Parliament, 2016a). With the BahamaLeaks, ICIJ brought a similar story from a different country
in September 2016. BahamaLeaks was again relevant to the EU, as former European Commissioner for
Competition Neelie Kroes was one of the people named in the documents (International Consortium of
Investigative Journalists, 2016b).

3.3.2.2 NGOs raising public pressure by monitoring and lobbying tax policy

The tax justice movement has been around for decades (Tax Justice Network, n.d.-a), but the tax scandals of
the last years seem to have given their advocacy some serious wings. Though not always directly linked to

42
the CCCTB, NGOs have continuously pressured and lobbied EU leaders to act against tax avoidance and
evasion. They for example:

 Organise campaigns like Publish What You Pay (Lesage & Kaçar, 2013) or more recently Stop
Tax Dodging (Eurodad, 2015b) and End Secrecy (Eurodad, 2017);

 Issue reports on tax avoidance like Eurodad (2015a), Oxfam International & Esmé Berkhout (2016)
and Eurodad (2016);

 Write op-eds like Palstra & Transparency International (2015) and work with politicians and others
stakeholders to bring public attention to corporate tax avoidance (McDonnell et al., 2015; Smith-
Meyer, 2016);

 Act as policy entrepreneurs by proposing new anti-tax avoidance measures (Lesage & Kaçar,
2013) or lobbying existing proposals (Eurodad, Ryding, & Ravenscroft, 2016; Oxfam International,
2016; Tax Justice Network, 2016).

All in all, these NGOs largely favour and lobby for a far-reaching UT-based CCCTB.

3.3.3 The European Parliament as a political ally of the CCCTB

Between the two proposals, the EP elections of 2014 took place. Looking at the division of seats among
political groups in the EP, political groups bringing together national parties on the far ends of the political
spectrum have increased their seats, while the traditional centre-leaning political groups lost a similar amount
of seats. Observing several national elections since, this trend seems to have continued and even increased
in force.

On the left wing of the EP, GUE/NGL group gained 17 seats in the 2014 elections, while there was also a rise
of several EU-sceptic groups with the right-wing ECR, EFDD and ENF groups gaining a combined 68 seats.
All of this despite the total EP having 16 seats less after 1st of July 2014. The traditional centre-tripartite: EPP,
S&D and ALDE all lost seats for a combined total of 80. The main loss of seats came from the centre-right
EPP who, though remaining the biggest group in the EP, lost 57 seats (European Parliament, 2017a, 2017b).

Despite this growth of EU-sceptics in the EP (BBC News, 2014), it seems rather clear that a broad majority of
MEPs still support increased EU tax harmonisation (Eurodad, 2015a). This was demonstrated by recent votes
on ATAD (European Parliament, 2016c) and CbCR (Barbière, 2017b), but mainly in the work of the different
EP committees set up in response to the tax scandals.

In the aftermath of LuxLeaks, the EP decided to set up a special committee to investigate the controversial tax
rulings. While it received wide support, the special TAXE committee was criticised because the three traditional
groups (EPP, S&D and ALDE) had refused to set up a stronger ‘inquiry committee’ with broader investigative
power and access to all national documents. The special committee could only investigate EU documents
(Robert, 2015a, 2015b). That S&D and EPP refused a stronger inquiry committee can be explained by the
existence of a ‘grand coalition’ between the EPP and S&D at that time, formed by Commission President Jean-
Claude Juncker (EPP) and EP President Martin Schulz (S&D) after the 2014 elections (Cooper, 2016)

43
After the first TAXE committee concluded its work, a follow-up committee was set up. Through hearings with
Commissioners, both TAXE committees managed to pressure the Commission to take a more proactive role
against tax avoidance (Eurodad, 2015a). In its final report, the TAX2 committee again called for a CCCTB,
which was backed by the plenary in July 2016, among other anti-tax avoidance proposals (European
Parliament, 2016b).

3.3.4 The Council in the backseat

Considering all of the above, the tax scandals put quite a lot of pressure on the Commission, and especially
President Juncker, to come with proposals for tackling corporate tax avoidance. A de facto coalition has since
been formed between the Commission, tax justice campaigners and the EP, who are acting as policy
entrepreneurs for the CCCTB. While Member States have generally taken a backseat during the re-launch,
they were able to significantly shape the new proposal, as highlighted above by the changes to the CCCTB
proposal.

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4 ASSESSMENT OF THE CHANCES OF THE 2016
CCCTB PROPOSAL
In this final chapter, the two CCCTB proposals and their different political settings are compared in order to
assess the chances of the 2016 proposal going forward. First, the problem stream will be discussed, showing
how the co-opted problem of corporate tax avoidance has significantly increased the 2016 proposal’s chances.
Second, within the policy stream, the differences between the 2016 and 2011 proposals will be studied and
and assessment will be made on whether they make it more or less likely for the proposal to succeed. Thirdly,
the political settings for both proposals will be compared and several factors that make the 2016 proposal more
and less likely to succeed will be discussed. Lastly, this chapter will generally discuss the chances and
obstacles which the CCCTB proposal faces, including the possibility of enhanced cooperation.

4.1 Problem stream: tax scandals as a trigger

Two problems drove the 2011 CCCTB. Primarily, the existence of tax obstacles preventing the well-functioning
of the internal market and, to a smaller extent, the loss of tax revenue because of harmful tax competition. As
previously discussed, the strategies used by the Commission were not successful, as the 2011 proposal
became stuck in Council negotiations.

A third problem became the main driver of the 2016 CCCTB; Large tax scandals were focusing events which
the Commission used as trigger to tackle corporate tax avoidance, claiming it as a problem in need of EU-level
solutions and presenting the re-launched CCCTB as a fundamental solution.

Variations in policy-relevant indicators of financial inequality and its relation to tax avoidance became a fourth
problem, reinforcing this anti-tax avoidance momentum.

These issues have been embraced by the Commission and tax justice campaigners to argue for corporate tax
reform on the EU-level. Since that has been quite successful for a number of other of anti-tax avoidance
proposals in the previous years, it is likely to increase the 2016 CCCTB’s chances significantly.

One open question though, is how long the momentum of these focusing events will last? While there was a
drive for anti-tax avoidance actions in the initial years after the tax scandals, it is unclear if this progress will
continue or for how long. As problems are continuously competing for attention according to the MSF’s
assumptions (Cairney & Zahaiadis, 2016), it is difficult to predict the long-term effect of focusing events like
the tax scandals.

4.2 Policy stream: new features increasing the CCCTB’s chances

The harmonisation of the corporate tax base in the EU through a CCCTB remains a controversial and
complicated plan (Pîrvu, 2012). Much of the initial CCCTB remains intact in 2016, but some of the amendments
are likely to have an effect on the proposal’s chances, through impacting mainly its value acceptability.

45
The 2016 CCCTB discussions are likely to be as complex as 2011 and the adoption of the CCCTB would still
require vast changes to corporate taxation in the EU. But two developments are possibly increasing the 2016
CCCTB’s technical feasibility (Zahariadis, 2008).

With the approval of ATAD 1, several provisions of the 2011 proposal have already been legislated, making
the 2016 proposal somewhat lighter (European Commission, 2015b, 2015d). Next, the two-step approach is
meant to enable the Council to negotiate the technicalities of the proposal “on a step-by-step basis (Council of
the EU, 2013).” The explicit aim of this approach is to make the technical negotiations easier. That the two-
step approach was introduced by request of Member States further strengthens this argument (Council of the
EU, 2013; European Commission, 2016c). However, outside observers like Eurodad (2016) are doubtful this
increases the CCCTB’s chances and fear the approach carries a risk of enabling only the CCTB to pass, with
the more challenging consolidation being left behind.

This two-step approach also carries a challenge to the value acceptability of the proposal. Tax justice
campaigners worry that if only the CCTB is adopted by the Council, as it will not end harmful tax competition
between the Member States, nor large-scale corporate tax avoidance. Some Member States might share this
worry too (Comte & Lamer, 2016; Eurodad et al., 2016; Oxfam International, 2016).

Tax justice campaigners have welcome the CC(C)TB for cancelling the existing patent box regimes of many
Member States, but they have also criticised the new R&D super-deduction and Allowance for Growth and
Investment, claiming these are unnecessary new loopholes through which MNCs can reduce their tax bills
(Eurodad et al., 2016; Oxfam International, 2016; Tax Justice Network, 2016).

However, both are likely to increase the CCCTB’s chances in the Council, as they are not only sweeteners for
businesses, but also for those Member States who would otherwise be reluctant to accept a CCCTB because
of their existing patent boxes or notional interest deduction schemes (Ernst & Young Global Limited, 2017).

One obstacle that clearly remains is the exact weighting of the formula, as failure to make progress on this
was the main reason why the post-2011 negotiations were unsuccessful (Lieb, 2016). Note that the EP
recommendation to change the weighting of the formula to give less weight to sales (Appel & Block, 2015) has
been ignored by the Commission and no changes were made compared to 2011. The topic is likely to again
be the focus of complex discussions and some different weighting or perhaps different formulas according to
economic sectors might be needed (Picciotto, 2013)

One obstacle that remains for the 2016 proposal’s value acceptability is the budgetary impact of the CCCTB.
Making the CCCTB compulsory for larger MNCs definitely impacts this. Large MNCs will no longer be able to
cherry pick the system which most fits their tax planning needs, thus closing off a central path for corporate
tax avoidance via profit shifting (European Commission, 2016c). On the one hand, the compulsory proposal
will be less interesting for many businesses (Gimdal, 2017), especially for those large MNCs that are currently
shifting their profits to low-tax jurisdictions in the EU. On the other hand, the compulsory aspect of the CCCTB
has been welcomed by tax justice campaigners as an important step forward against tax avoidance (Eurodad,
2016) and will likely be welcomed by many of the Member States supporting the CCCTB as an anti-tax
avoidance measure.

46
What seems to be missing from the 2016 proposal is a measure to deal with, or even compensate for, the
abrupt losses in tax revenue which some Member States will face if a CCCTB is introduced. The Commission
calculated that Luxembourg, the UK and Spain would see the largest negative tax revenue impacts because
of a CCCTB (Comte & Lamer, 2016). Perhaps some kind of financial settlement or relieve to compensate for
a short-term decrease of tax revenue might be needed to convince those Member States most impacted
(Brunsden, 2017). This might be a difficult pill to swallow for those who believe Member States like Ireland and
Luxembourg are cheating the other Member States by setting up preferential tax regimes allowing for harmful
tax competition. Another related idea is to set up a convergence mechanism, similar to that of the euro-
transition, to spread the transition to a CCCTB over a longer period. This would give Luxembourg, and Member
States in a similar position, time to move to different revenue streams and diversify their economies (Lieb,
2016).

In conclusion, the new features of the 2016 proposal seem to strengthen its chances of adoption by the
Council, by taking away some of the obstacles which the 2011 CCCTB seems to have encountered during
Council negotiations, but the budgetary and formula knots remain fundamental obstacles.

4.3 Politics stream: is the time right for a CCCTB?

Historically, Member States have been very hesitant to take significant steps towards tax harmonisation (Pîrvu,
2012) but the Commission clearly believed that there is a policy window for new taxation proposals after the
tax scandals (Comte & Lamer, 2016). There clearly was a policy window for tackling corporate tax on the EU-
level, as shown by the swift adoption of several corporate tax proposals at the EU-level in recent years after
little to no progress for decades.

So the question here is if the policy window is still open enough for the CCCTB to pass through? How much
is left of the anti-tax avoidance momentum? One indicator is the public CbCR proposal’s (lack of) progress.
Another will be the vote on the CCCTB in the EP. A last indication is the political balance within the Council,
including the influence of key Member States, a possible Brexit effect and upcoming presidencies.

4.3.1 Public CbCR as an indication

The case of public CbCR seems to indicate that the momentum for corporate tax policy initiatives on the EU-
level is slowing down. The Commission’s proposal has so far met two obstacles that seem to indicate more
opposition against such proposals than expected. Consequently, the policy window for corporate tax reform
might be closing.

First, the Council has challenged the legal basis of the proposal, with its Legal Service issuing an opinion that
the proposal is taxation and should follow the special consultation procedure requiring unanimity. This attempt
has not yet been endorsed by the Council though, as changing the legal basis in such a way would also require
a unanimous vote by the Council (Remeur, 2017). Nevertheless, this indicates that there is still significant
opposition to tax harmonisation within the Council.

47
Second, the EP watered down the proposal when it voted on it in July 2017, by adopting an amendment that
allows Member States to give MNCs exceptions from CbCR when commercially sensitive information is at risk
because of public reporting (Tax Justice Network, 2017). Furthermore and perhaps not surprisingly, the EP
did not follow the Council’s attempt to change legal basis of the proposal (Remeur, 2017). The main take away
is that the EP, despite generally being in favour of more tax harmonisation, has added a significant loophole
to this proposal, which might be indicative of more hesitance towards the CCCTB.

The outcome is unsure but if public CbCR passes, it would be a victory for tax justice campaigners. The public
availability of corporate tax data of MNCs would allow researchers and campaigners to further study the MNCs’
misalignments between profits and economic activity. More reports and studies on corporate tax avoidance by
MNCs backed by direct data would likely only strengthen public pressure on Member States to act against
corporate tax avoidance (Cobham & Janský, 2017) and would make the adoption of the CCCTB more
probable.

If, despite the lower legislative threshold of co-decision, the public CbCR proposal does not pass the Council,
gets significantly delayed or watered down, it would indicate a slowing down of momentum for the tax
harmonisation in the EU. It may even indicate that the policy window has been closed.

4.3.2 How will the EP react?

The EP has announced it is planning to vote on both proposals by the end of 2017, with votes expected in the
ECON and JURI committees on 4 December and a plenary vote on 11 December 2017 (European Parliament,
n.d.-d, n.d.-c). It is impossible to predict what the specific outcome of the procedure in the EP will be. As
established above, the EP has been supportive of the CCCTB in the past and all indications show that there
is still a wide majority of MEPs in favour (European Parliament, 2016b). MEPs will likely confirm their support
for both proposals and because the EP is dealing with both CC(C)TB proposals as one, it will likely not be an
advocate of the two-step approach.

The remaining question is how much pressure the EP will lay on the Council when it comes to the CCCTB.
Based on the first reactions, one possible amendment might focus on the €750 million threshold, which several
MEPs indicated as too high (European Parliament, 2016d).

4.3.3 Stakeholders’ reactions

The main stakeholders from civil society and businesses all support the CCCTB proposal, though each
stakeholder is lobbying for different changes and amendments. Such a broad coalition is likely to at least
increase the chances for the CCCTB, though how much exactly is difficult (or even impossible) to measure.

As argued in 3.3.2, tax justice campaigners have played a central role in the re-launch of the CCCTB by
channelling and strengthening the public outrage after the tax scandals. They have clearly supported the idea
of the CCCTB, but argue the proposal needs to be designed carefully for it to successfully tackle corporate tax
avoidance. In their reactions to the 2016 CCCTB proposal, they generally described it as a big step forward,
but were also critical of several of its features, as mentioned above (Eurodad, 2016; Oxfam International, 2016;
Tax Justice Network, 2016).

48
The European Trade Union Confederation (ETUC) generally followed the same line as the above-mentioned
NGOs and were equally critical of the new tax deductions in the 2016 proposal. Additionally, ETUC argues
that the €750 million threshold should be lowered to €40 million. ETUC also fears that the Council might stop
at CCTB, with only the CCCTB truly ending harmful tax competition (Gimdal, 2017).

Comments by business interest groups like BusinessEurope and AmCham EU mostly mirror those of tax
justice campaigners and trade unions. Businesses welcomed the R&D super-deduction and Allowance, but
were critical of the CCCTB being mandatory for businesses (AmCham EU, 2016; BusinessEurope, 2016; Ernst
& Young Global Limited, 2017; Kirwin, 2016a). Nevertheless, the basics of the CCCTB remain interesting for
businesses, as it would allow for cross-border loss relief and increase legal certainty for MNCs over a longer
time by adopting one set of rules for determining the corporate tax base (Ernst & Young Global Limited, 2017).

Perhaps somewhat surprisingly though, businesses were also critical of the two-step approach and fear
Member States will only agree on the CCTB. Businesses are concerned they will not be able to reap the full
benefits of consolidation, like the subsequent decrease of administrative costs and reduction in double taxation
disputes.

4.3.4 Key Member States in the Council

In the end, all Member States are needed to adopt the CC- and/or CCCTB. As the proposal was made less
than a year ago, it is fair to say that one can only make reasoned estimates about the upcoming negotiations
or outcomes. Nevertheless, several trends can be identified that will very likely have an impact on the process.

As in 2011, the biggest obstacles for the CCCTB’s are still several Member States, who oppose the CCCTB
specifically or EU tax harmonisation in general (Kirwin, 2016b). As any Member State can technically veto the
CCCTB, it makes sense to look for indications of opposition and to especially look at some of the ‘usual
suspect’ Member States to assess if their opposition is still as strong as before.

One early indicator of such oppositions are the reasoned opinions which national parliaments had to submit
by 3 January 2017. The parliaments of six countries had submitted reasoned opinions on the CCTB and/or
the CCCTB by the deadline in the beginning of 2017: Denmark, Ireland, Luxembourg, Malta, Sweden, and the
Netherlands (Gimdal, 2017). This list is slightly shorter than in 2011, as Slovakia, Romania, Bulgaria and the
UK have not submitted reasoned opinions again. This can be explained by the shot notice of the deadline, but
it might also signal a change of opinion by those Member States. However this is particularly unlikely for the
UK, which will be discussed in 4.3.4.5.

4.3.4.1 Malta

Malta is important to the CCCTB, as it held the Council presidency during the first half of 2017. According to
POLITICO (2017)’s final assessment of the Maltese presidency, progress on the CCCTB has been slow during
those six months. This confirms earlier reports that the Maltese presidency, supported by Luxembourg and
Belgium, was trying to slow down progress on the CCCTB at the informal ECOFIN meeting in April 2017
(Guarascio, 2017; Guarascio & Strupczewski, 2017). This is not very surprising. Malta opposed the CCCTB in
2011 and submitted a reasoned opinion again in 2016. Maltese political parties seem to almost unanimously

49
agree on opposing the CCCTB, exemplified by Maltese MEPs’ unanimously voting against the idea of a
CCCTB in 2015 (Grech, 2015).

4.3.4.2 Ireland

Irish governments have long been vocal opponents of the CCCTB and have continued this even when their
taxation position was challenged by France and Germany after the sovereign debt crisis bailout (Appel & Block,
2015). Considering that they have again submitted a reasoned opinion challenging the legal basis of the
proposal, it seems rather unlikely their position has changed drastically (Duffy & Independent.ie Business
Desk, 2017). This is reinforced by the generally negative tone and opinions towards the CCCTB in Irish media
after the re-launch (Collins, 2016; Taylor, 2016).

4.3.4.3 The Netherlands

While the Netherlands did not support the CCCTB in the past, citing concerns about the effect a CCCTB would
have on their GDP and growth (Eurodad, 2015a), it is unclear what the Dutch government’s current position
is, as there is no government. Dutch political parties have so far not succeeded in forming a new government
coalition since the parliamentary elections in March 2017 (De Morgen, 2017).

4.3.4.4 Luxembourg

Luxembourg has long been under pressure to change its famously secretive tax system (Houlder, 2014). This
pressure increased enormously after the LuxLeaks scandal (Brunsden, 2017). There were some careful signs
that the Luxembourg government might support the CCCTB (Eurodad, 2015a). But then again, there have
been several recent indications that Luxembourg is not succumbing to this pressure and still opposes the
CCCTB.

Luxembourg’s Finance Minister Pierre Gramegna recently called the scandal “an important event, but it’s been
digested (Brunsden, 2017)”. And while the government is past the scandal, it seems that the system of tax
rulings laid bare by LuxLeaks was hardly affected and has even grown (Eurodad, 2016; Nielsen, 2016).
Luxembourg’s opposition can partially be explained by their reliance on income from corporate taxation, as it
would be the Member State most financially impacted by the CCCTB (Comte & Lamer, 2016).

Luxembourg joined Belgium and Malta in April 2017 in trying to slow down progress on the CCCTB (Guarascio,
2017). Additionally, its parliament opposed the CCCTB in a reasoned opinion (Gimdal, 2017). This indicates
that Luxembourg remains opposed to the CCCTB.

4.3.4.5 The UK and the Brexit effect

Another special case is the UK, as its governments have in the past always been some of the CCCTB’s most
vocal opponents (Tax Justice Network, 2016). The UK confirmed its continued opposition when the CCCTB
re-launch was announced in 2015 (Eurodad, 2015a), but is now preparing to leave the EU.

Clearly, when (or if) one of the biggest opponents of tax harmonisation eventually leaves the EU, some new
opportunities might open up and the EU’s fight against tax avoidance might be strengthened (Cobham, 2017;
A. A. Parker, 2016). For now, it also seems unlikely that the UK would gain any goodwill, much-needed during

50
the Brexit negotiations, by blocking progress on the CCCTB in the Council if all other Member States were
close to a deal, though they could (Kirwin, 2016a).

The UK were of course never the only opponents of the CCCTB. Some opponents in e.g. Ireland were afraid
that they would become politically isolated in opposing the CCCTB (Stearns, 2016), but it is already clear this
was unfounded. Other Member States opposing the CCCTB have swiftly become more vocal about it (Smith-
Meyer, 2017).

But the biggest impact of Brexit might be on the EU’s political agenda. While the Commission are working hard
to pretend that the impact of the negotiations on the other day-to-day work of the institutions will be minimal
(Herszenhorn & Eder, 2017), Brexit negotiations are likely to come to a boiling point in the second half of 2018
and will potentially hinder progress in other policy fields (Ernst & Young Global Limited, 2017).

4.3.5 Where does the CCCTB go next?

The Commission’s timeline is ambitious; it wants to introduce the CCTB by 2020 and the CCCTB by 2022 (De
Morgen, 2016), meaning those negotiations would have to be finalised by the end of 2018 and 2019
respectively (Eriksson, 2016).

The CCCTB proposal is now in the hands of the Estonian presidency, with Bulgaria and Austria to follow
(European Council & Council of the EU, 2017b). The outcomes of their presidencies are hard to predict,
especially since it is Estonia’s and will be Bulgaria’s first presidency, which could even have a negative impact.
Adding to this uncertainty, none of the three Member States have publicly voiced their opinion on the 2016
CCCTB proposal.

The focus and time which these presidencies will be able to devote to the CCCTB will likely be limited. Even if
the political will exists to negotiate a complex and often technical issue like the CCCTB, those negotiations are
likely to go on for years (Pîrvu, 2012).

The Brexit negotiations are likely to dominate much of 2018, especially considering that the March 2019
deadline will require an actual Brexit-agreement by the end of 2018. Additionally, European elections are
scheduled for spring 2019 and election fever will kick in by the end of 2018 or earlier.

Considering the complexity of the CCCTB negotiations it seems very unlikely that the Commission’s deadlines
will be met. Agreeing on the CCTB before the European elections would be impressive. Since the whole
elections process is likely to be the EU’s main focus for most of 2019, it is rather unlikely that much progress
will be made that year.

The Commission remains clearly convinced that a consensus is possible with the 2016 proposal, to cite the
proposal’s main architect Uwe Ihli: “Member states will not stand by and watch their tax base be eroded by
another member country (Ihli in Kirwin, 2016).”

Considering all of the above, it seems that a deal on the full CCCTB in the near future is unlikely, but a deal
on the CCTB seems more realistic. Regardless, the chances of the CCCTB seem much better than in 2011.

One final option which has not been treated so far is that of enhanced cooperation between a smaller group
of Member States. As the adoption of the CCCTB would be very complex and requires the unanimity of 28
51
Member States, a consensus is by nature very difficult to achieve, so enhanced cooperation between a smaller
group of Member States is an option worth considering.

Several authors have highlighted this option for the CCCTB (Dayle Siu et al., 2017; Picciotto, 2012) or expected
this to be the likely outcome (Ruding, 2012). Even Taxation Commissioner Kovacs suggested this in 2006,
expecting that about 20 Member States would join this track, if a consensus could not be achieved within the
Council (Euractiv, 2005; G. Parker, 2005). Clearly that did not happen.

Enhanced cooperation must be proposed by the Commission and approved by the EP and a qualified majority
in the European Council (Pîrvu, 2012, p. 146). Theoretically, it would lead to a multi-speed Europe, but it has
only been attempted once so far. A group of Member States have been trying to agree on a Financial
Transaction Tax under enhanced cooperation, but have failed to produce a deal, which has led some media
organisations to question the basic idea of enhanced cooperation (Barbière, 2017a).

The outcome of a CCCTB through enhanced cooperation would be uncertain. On the one hand, working with
a small group of countries might strengthen its provisions, but reducing its geographic scope would also allow
for those Member States engaging and profiting from harmful tax competition to stay out of the system,
decreasing the CCCTB’s impact against tax avoidance (Picciotto, 2012). This last argument carries extra
weight because of the strong anti-tax avoidance focus of the 2016 proposal and makes enhanced cooperation
much less likely now than after 2011.

52
5 CONCLUSION
This thesis has applied the multiple stream framework to study the political processes of the 2011 CCCTB
proposal and its 2016 re-launch, while also comparing the two proposals in order to assess how much of a
policy window there is for this latest proposal. This research has again established that the MSF is an excellent
lens for studying EU policy processes and can provide a structure for comparing different cases.

The 2011 CCCTB proposal was mainly a continuation of previous attempts of the European Commission (and
partially the EP) to remove tax obstacles for businesses that prevent the proper functioning of the Single
Market. This resulted in a very pro-business proposal. The Commission, France and Germany tried to couple
the proposal to the growth agenda of the EU after the post-2008 crises, but were unsuccessful. The CCCTB
met a lot of resistance in the Council due to the strong opposition of several Member States, most notably
Ireland and the UK, against tax harmonisation in the EU. In the end, negotiations stalled especially on
discussions about the formulary apportionment.

Next, this thesis explained how the CCCTB was re-launched by the Commission in 2016 after growing
pressure on the Commission and Member States over corporate tax avoidance triggered by a series of tax
scandals, most notably LuxLeaks. The 2016 CCCTB is supported by a de facto coalition between the
Commission, Parliament and tax justice campaigners. The proposal also falls within the growing attention to
tax avoidance’s role in global financial inequality. The proposal was adapted to fit this new impetus, making it
more efficient against tax avoidance, as well as more attractive to businesses and hesitant Member States.

The MSF was used to compare the two proposals, arguing that while there clearly is a policy window for the
CCCTB, it is unclear if it will remain open long enough for a consensus to be found in the Council. The anti-
tax avoidance drive has already been successful for a number of other proposals, but there are some
indications that this momentum might be slowing down. Several new elements of the proposal like the R&D
super-deduction and Allowance for Growth and Investment also suggest the proposal might have become
more interesting for hesitant Member States. The effect of the new two-step approach is unclear, but there
clearly is a possibility of only a CCTB being adopted, which some consider a risk as it would mean the more
controversial formula apportionment might not be introduced in the end.

A Council consensus on the CCCTB is now more probable than with the 2011 proposal, but remains
challenging. The impact of its introduction would be large, not the least financially. Even if all states agree on
moving forward, key issues like the apportionment formula are likely to be the subject of complex discussions
that will take up years.

Any deal is unlikely to be reached in the near future, because of both the complex technical feasibility of any
CCCTB deal, as well as much of the EU’s agenda being taken up by the upcoming Brexit negotiations and
European Parliament elections. Enhanced cooperation between a smaller group of Member States has been
suggested as a way forward, but the anti-tax avoidance focus of the 2016 CCCTB makes this an unrealistic
option.

Despite its extensive history, the CCCTB still has a long way to go and its future is unsure. Further research
should especially focus on the Council’s work on the CCCTB and other taxation issues. While the institution
53
plays a crucial role in the field of taxation, it remains very challenging to unveil what is inside that black box
where officials discuss and make decisions about key taxation proposals in the EU.

54
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