Position Paper on the Business in Europe: Framework for Income Taxation (BEFIT) proposal
The European Commission (EC) has published a directive Business in Europe: Framework for Income Taxation (BEFIT) proposal. Purpose of the proposal is to boost the competitiveness of the single market, reduce compliance costs (also for SMEs’), making it easier for companies to do business and to support investment in the EU. BEFIT would be a single corporate tax rulebook for the EU, consisting of rules for common tax base and later the allocation of profits between Member States. Technology Industries of Finland (TIF) is of the opinion that although the said goals of BEFIT are highly supportable, BEFIT is not the correct tool.
- Proposal is untimely. Companies and tax administrations alike have their hands full with trying to properly implement the minimum tax directive. The BEFIT proposal should be postponed to at least 2030. A legislative break is acutely needed.
- BEFIT should always be optional for business. The model has to be made so attractive that companies will prefer joining it rather than staying outside the system.
- A cross-border tax relief and the proposal to abandon withholding taxation are highly supportable.
- The goal must be to make taxation simpler. It should use a “one stop shop” -model allowing for filing just one consolidated tax return.
- The Commission urges to allocate saved administrative costs to green investments. TIF suggests that in order to effectively support green investments, the BEFIT model should include considerable R&D tax incentives for digital green investments, boosting double transition to green and digital business.
- Intangibles must be included in the possible allocation formula. Value creation in the digitalising economy relies on intangible assets. A decades old allocation formula is not sustainable and up to date.
- As the idea is to have an overall reform of corporate income taxation, the EC should also propose which EU tax regulation will be abandoned (in addition to withholding taxation).
- The Commission should publish the outlines of the allocation formula before proceeding with the preparation of BEFIT.
