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Brexit
Remain or Leave?
By Grahame R Jackson, Partner and Tania Rahmany, Associate, Hassans
convergence” means that the proposal remains live.
The latest proposal is for a two-stage
process. The first stage is the introduction of a common corporate tax base. The rules about what is taxable and what is not for companies will be harmonised across the EU, but the allocation of which jurisdiction takes the tax will remain based on tax residence. The second stage is more radical, with tax being collected centrally and allocated according to a formula based on Payroll, Sales, and Asset location. The aim is to apportion
tax to where income is generated and not to mere tax residence. The only discretion remaining with Member States will be the applicable rate which will be set within an approved range. Implementation would commence for groups with turnover exceeding €750m, later encompassing all groups within seven years.
Code of Conduct Group
The CCCTB will amount to EU-wide corporate tax harmonisation and an end to independence for Member States with regard to corporate taxation. It is estimated that it will eliminate 70% of EU tax avoidance It will fit naturally with recent proposals for national budgets within the Eurozone to be set jointly. Even if a member state opts out from the CCCTB it is unlikely they would be allowed complete freedom and the work of the Code of Conduct Group (a body which already exists and led to Gibraltar introducing various legislative amendments) would be accelerated.
Such a radical proposal is difficult to implement and Member States have jealously guarded their tax independence, but the CCCTB cannot be written off. The EU Parliament approved the draft directives in March 2018, with an implementation date of 1st Jan 2020, a date now impossible. The goal of “ever closer
Whether the UK remains or leaves the EU without a deal is yet to be decided, which leaves many unanswered questions for jurisdictions like Gibraltar.
The Leavers would have us believe that there would be freedom from the constraints of the EU. Remainers have been almost silent on what the EU’s future plans are and sell their vision as one of the status quo.
Neither of these visions is the full truth of what will happen. The world is one of increasing interdependence. Jurisdictions can no longer just do what they like with its tax arrangements. The OECD black list shows us that. Moreover, the EU will not remain the same forever - it is an engine for integration and direct taxation is the last great area where there are no harmonisation provisions.
Remain
If Gibraltar remains in the EU it will be subject to new EU provisions. The multi-track vision of the EU means that proposals will be implemented by member states at different times. We assume, for the purposes of this article, that Gibraltar will
implement all proposals immediately.
2016 Anti-Avoidance Package.
Includes proposals around transparency and refreshing the Anti-Tax Avoidance Directive will continue to be implemented. Pressure to reveal ownership of assets and expose those disguising their wealth will increase.
Directive on Administrative Cooperation 6. Gibraltar has agreed to implement this regime for Spanish related matters regardless of Brexit’s outcome. The regime, which requires reporting of legal but “aggressive” tax avoidance arrangements, would be mandated onto Gibraltar by the EU if we Remain. It will radically alter the compliance landscape for local practitioners and impact on potential clients for international practitioners. Implementation is due on 1st January 2020.
Common Consolidated Corporate Tax Base (CCCTB). Proposed to be a common corporate tax system for the entire EU, the CCCTB has been rejected several times. However, the Franco-German Treaty of 2019 and the Meseberg Declaration by France and Germany pledging to work to a Franco-German joint economic zone with “actual tax
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24 Gibraltar International
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