The 18 May 2021 Communication on Business Taxation for the 21st Century sets out a long-term vision for a robust, efficient and fair business tax framework that supports the post-COVID-19 recovery, removes obstacles to cross-border investment and creates an environment conducive to fair and sustainable growth.
In particular, the Communication announces the Business in Europe: Framework for Income Taxation (BEFIT) initiative, which provides for a single corporate tax rulebook for the EU. This initiative will lead to a fairer allocation of taxing rights between Member States, reduce administrative burden, minimise tax avoidance opportunities and foster a more business-friendly environment in the Single Market. In a wider context, the Communication lays ground for reforming the EU corporate tax systems to address aggressive tax planning and advance a level playing field.
Building on its analytical tools, such as the CORTAX model, the JRC provides key inputs to the evidence base underpinning these policy developments.
The JRC actively contributed to the economic impact assessment of two flagship initiatives led by DG TAXUD: Business in Europe: Framework for Income Taxation (BEFIT) and Head Office Tax (HOT) System for SMEs. Previously, the JRC has contributed to the Impact Assessment of the CCCTB proposal by investigating its economic impact (Álvarez-Martínez et al., 2016). In this context, the JRC has also analysed the economic impact of an EU harmonised tax base in Barrios et al. (2020).
To support the efforts against aggressive tax planning, the JRC has estimated tax revenue losses related to Base Erosion and Profit shifting (BEPS) and provided the first assessment of its macroeconomic effects. Using the CORTAX model, Álvarez-Martínez et al. (2022) estimate net corporate tax revenue losses in the EU at EUR 36 billion per year (7.7% of CIT revenues).