The Common Consolidated Corporate Tax Base: the end of exclusive taxation competency?

By Joshua Kieran-Glennon

The Common Consolidated Corporate Tax Base (CCCTB) is an EU policy aimed at harmonising the collection of corporation tax in all Member States. It targets low tax jurisdictions like Ireland, and seeks to prevent multinational corporations from allocating their profits to offices or subsidiaries located in those jurisdictions, taxing them instead at their source. European Commission President Jean-Claude Juncker has stated that “While recognising the competence of Member States, the modernisation of tax systems is essential for delivering on the priorities of the European Semester of economic policy coordination” (Juncker, 2014). EU states generally retain exclusive competency over their taxation policy, and as corporation tax is often used to pursue specific policy outcomes, as well as generating income for the state, interference with it can have wide-ranging consequences. This post explores what economic effects the CCCTB is likely to have on Ireland, and whether it constitutes an infringement on taxation competency.

The Treaty on the Functioning of the European Union, in listing the competences of the Union, makes no reference to taxation policy, meaning that it has generally been left to the Member States to enact their own tax rules. The EU’s power to act on this at all derives from Article 94 TFEU, which empowers the Council, “acting unanimously” to pass directives for the “approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the common market”. (EU, TFEU, 2007) McLure cites Senden (2004), who defines approximation as “integration processes that do not lead to the creation of uniform law, but rather to the creation of common frameworks or legal rules establishing a common goal, which leave room for divergent national specification” (McLure, 2007, p379). An analysis of the potential effects of the policy will show whether it is likely to adhere to these criteria.

Scholars often argue that tax competition produces a “race to the bottom” whereby competing states are forced to lower their rates in order to attract FDI (Sweeney, 2010). This race is often criticised as being detrimental to all parties, though in an EU context Barry presents it as being necessary to allow smaller, peripheral Member States to compete with larger neighbours, despite their distance from major markets (Barry, 2010). Barry goes on to argue that harmonisation would harm all states, eliminating both the attractive investment opportunities that smaller states provide through low tax rates, and the additional profits that larger states make through higher rates. Although the CCCTB doesn’t harmonise the rate of tax, it does harmonise the manner in which it is calculated, to a system based on labour, sales and assets located in each jurisdiction, i.e. a source-based allocation. Feust et al. suggest that this is likely to result in a large departure of FDI from Ireland, to larger economies like Germany and France (Feust et al., 2007). Barry notes also that the exclusion of intellectual property from the formula would hurt Ireland further. The headquarters of major IT corporations in Ireland generate significant IP currently taxed here, but would be excluded under the CCCTB. This would likely lead to Ireland needing to raise its rate of corporation tax to generate more revenue from remaining domestic industry, to compensate for the departure of FDI predicted by Feust. Therefore, though the EU is technically correct in stating that “Corporate tax rates are not covered by the CCCTB, as these remain an area of national sovereignty” (EU Representation in Ireland, 2016), it could have the equivalent effect of setting a base rate of corporation tax for Ireland that is significantly higher than the status quo.

Beyond the effective requirement to raise its basic rate of corporation tax, Ireland would also be obliged to eliminate other rates of tax available to corporations (i.e. the 25% rate for non-trading entities and the 33% rate of capital gains tax) (Timmermans and Moscovici, 2016). Ireland submitted that this was likely to cost the state upwards of 450 million euro (Houses of the Oireachtas, 2016). This imposition of a single rate, though not a specific one, could be argued to constitute an infringement on the competence of taxation, as it prevents Member States from using corporation tax as a vehicle to bring about other policy outcomes e.g. discouraging certain activities by imposing higher rates on particular industries, or imposing lower rates to encourage development in certain sectors. Loughlin views tax law as “part of the apparatus of government”, and having “regulatory and facilitative functions and therefore is oriented to aims and objectives” (Loughlin, 1992). If the state is limited to one rate of corporation tax, it limits the aims and objectives that it is able to pursue. Though not explicitly setting tax rates in Member States, this policy would be dictating the manner in which Member States were able to use corporation tax as an instrument of political will, infringing further on the exclusive competency of those Member States, not just in regard to taxation, but also in the sort of policy outcomes governments are empowered to pursue.

This analysis of the CCCTB’s proposals shows that it would be difficult for Ireland to engage in “divergent national specification” (McLure, 2007) in accordance with its own policy interests were the directive to be put in place. By eliminating multiple rates, it would be harder for Ireland to respond to differing market conditions. Barry’s analysis of the benefits of tax competition for smaller states, along with Feust’s understanding of the potential effects of this competition ending, shows that the winners under the CCCTB are large, Mainland-European economies, who would gain at the expense of peripheral nations for whom tax competition is a vital economic tool. The CCCTB, though ostensibly about a change in the calculation of corporation tax, has far wider effects. It is submitted that it would encroach on the competence of taxation, supposedly an exclusive competence of Member States, without allowing Member States to exercise their own policy discretion as to how the desired outcomes are to be achieved.



 Barry, F. (2010) “The case against corporation tax harmonisation and tax-base consolidation: a view from Ireland”, Transfer: European Review of Labour and Research, 16(1), pp. 71-80

European Union, Treaty on the Functioning of the European Union. (2007) Luxembourg: The Publications Office of the European Union

European Union Representation in Ireland (2016), “Commission proposes major corporate tax reform for the EU” Available at:á-athchóiriú-mór-ar-chóras-cánach-corparáid%C3%AD-ae-molta-ag-gcoimisiún_en (Accessed: 15 October 2017)

Feust, C., Hemmelgarn, T. and Ramb, F. (2007) “How would the introduction of an EU-wide formula apportionment affect the distribution and size of the corporate tax base? An analysis based on German multinationals”, International Tax and Public Finance, 14(5) pp.606-626

Houses of the Oireachtas, Joint Committee on Finance, Public Expenditure and Reform and Taoiseach (2016) “Report under Dáil Standing Order 114 and Seanad Standing Order 107 on COM (2016) 683 & COM (2016) 685 – Proposal for a Council Directive on a Common Consolidated Corporate Tax Base(CCCTB) & Proposal for a Council Directive on a Common Corporate Tax Base (CCTB)”. Dublin: Houses of the Oireachtas. Available at:

Juncker, J. (2017) “State of the Union Address”. Brussels: European Commission Press Release Database. Accessed at: (Accessed: 15 October 2017)

Loughlin, M. (1992) Public Law and Political Theory. Oxford: Oxford University Press

McLure, C. (2007) “Legislative, Judicial, Soft Law, and Cooperative Approaches to Harmonizing Corporate Income Taxes in the US and the EU”, Columbia Journal of European Law, 14(5), pp.377-444

Sweeney, P. (2010) “Ireland’s low corporation tax: the case for tax coordination in the Union”, Transfer: European Review of Labour and Research, 16(1), pp. 55-69

Timmermans, F. and Moscovici, P. (2016), Letter to Senator Denis O’Donovan, President of Seanad Eireann, 20 March. Available at: (Accessed: 15 October 2017)



Joshua Kieran-Glennon is a stage three BCL student studying Law with Politics, and is a former treasurer of the UCD Literary & Historical Society. This blog post addresses the EU’s proposed Common Consolidated Corporate Tax Base, and was prepared as part of the UCD School of Politics and International Relations Module “Politics and Policies of the European Union”. This blog post was written as part of coursework for POL30350 – Politics and Policy-making in the EU.

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