Apple and the CCCTB: Can the European Commission Have Both?

14 March 2017
By Dr. Emmanuel Llinares and Guillaume Madelpuech

International tax is experiencing an unprecedented period of change. The change can be seen in the progress of the Organisation for Economic Co-operation and Development (OECD)/G20 base erosion and profit shifting action plan. The European Commission has also brought its weight into the international tax arena. Among its recent initiatives aimed at ‘‘fairer, simpler and more effective corporate taxation’’ in the EU, two initiatives may have particularly significant consequences on the future of taxation, both within and outside of the EU.

The first initiative involves the competition directorate’s (DG Comp) new stance on tax- and transfer pricing-related state aid inquiries. The second initiative is the contemplated relaunch of the common consolidated corporate tax base (CCCTB), announced on 25 October 2016 and led by the directorate for taxation and customs (DG TAXUD).

In its recent public decisions on state aid—including the notorious decision on Apple—the European Commission has relied on the idea that the arm’s-length principle not only applied to cases as a result of domestic tax law or tax treaties but also because the principle stemmed from EU fundamental law (TFEU).

However, at the same time, the commission’s CCCTB is a formulary apportionment system that effectively vitiates the arm’s-length principle.

In their article published in the February edition of Tax Notes International, the NERA authors, Managing Director Dr. Emmanuel Llinares and Principal Guillaume Madelpuech, discuss how this contradiction creates another obstacle for the CCCTB.

Reprinted with permission from Tax Notes Int’l, February 6, 2017, p. 557