Some Changes in International Tax

AuthorCaroline D. Strobel
Date01 March 2017
Published date01 March 2017
© 2017 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22254
Some Changes in International Tax
Caroline D. Strobel
For corporations doing
business in the European
Union (EU), changes may be
necessary in how they account
for taxable income. The EU is
trying to prevent corporations
like Apple from taking advan-
tage of low tax rates in coun-
tries like Ireland. Apple has
currently been fined by the EU
and it remains to be seen what
Apple will do. The European
Commission has published
a proposal for a uniform set
of rules on taxing corporate
profits. This initiative, known
as the common consolidated
corporate tax base, or CCCTB,
would require multinational
corporations to pay taxes
based on where their assets and
employees are located, as well
as where their sales occur.
To become law, the
CCCTBwould need unani-
mous approval by all 28 EU
member states, and subse-
quent approval by each of
their national parliaments. If
enacted, it would take effect
in two phases. The first phase
would require companies with
revenues in the EU in excess of
$750 million a year to calculate
taxable income uniformly
across all countries. This does
not mean that countries will
have to use the same tax rate,
just that taxable income cal-
culations will be uniform. The
second phase would involve all
other companies, forcing them
to calculate taxable income
based on the threefactors:
assets, employees, and sales.
The EU estimates that the
new rules will eliminate about
70% of the maneuvering that
multinational corporations do
to shift income and expenses
between branches to reduce
their overall tax liabilities. The
corporate tax rate in Germany
is about 30% while tax rates in
Eastern European countries
such as Poland, Hungary, and
the Czech Republic are about
19%. Comments indicate that
including assets as a factor may
result in higher taxes for some
Corporations are already
gearing up for the new report-
ing rules as they are anticipated
to make significant changes
in the amount of tax they will
pay. The EU’s Council of Min-
isters plans to start discussion
of these proposed rules in 2017.
It will take time and discus-
sion before the rules can be
adopted. Each company in the
first phase will have to form an
opinion about how the changes
affect them.
On June 23, 2016, the Brit-
ish people voted to leave the
EU. Britain’s exit (Brexit) will
likely happen in April 2019 or
later. Many areas of shared
tax law with the EU will be
affected. It is important to
consider what taxes might be
affected by this move when,
how, and if this decoupling
takes place. U.S. and non-EU
companies that operate in
Europe with their European
base in Britain may be signifi-
cantly affected.
One of the most significant
tax changes could come in the
value-added tax (VAT). The
EU version of the VAT uses
the Organization for Economic
Cooperation and Develop-
ment (OECD) model, which
has been adopted around the
world including Africa and
Asia. China and India are com-
pleting sales tax reforms that
follow the EU model. After
leaving the EU, Britain could
make changes in the VAT that

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