Co-ops react to European Commission proposals to simplify tax rules

The proposal could reduce tax compliance costs for businesses in the EU by up to 65%, but there are concerns it could lead to unequal treatment of co-ops

European co-operatives have responded to a European Commission consultation on its proposal for a single set of rules to determine the tax base of groups of companies in the EU.

Adopted on 12 September 2023, the Business in Europe: Framework for Taxation (BEFIT) proposal would impact groups operating in the EU with an annual combined revenue of at least €750m. The measures aim to reduce tax compliance costs for large businesses, primarily those that operate in more than one member state. The commission says these measures could reduce tax compliance costs for businesses operating in the EU by up to 65%.

Under the proposal, all companies in a group would be able to file an information return with the tax bases of all the group members with the tax administration of one member state. Furthermore, the tax bases of all members of the group will be aggregated into one single tax base and each member of the BEFIT group will have a percentage of the aggregated tax base calculated on the basis of the average of the taxable results in the previous three fiscal years.

The consultation received responses from several co-operative apexes: European confederation of industrial and service cooperatives (Cecop), Cooperatives Europe, the European Association of Co-operative Banks (EACB), Cogeca, Legacoop, Confecooperative and Alleanza delle Cooperative Italiane.

In their submission, Cecop, Cooperatives Europe and Cogeca supported the move to develop a single European corporate tax law but warned about several issues that could risk leading to unequal treatment of social economy actors and co-operatives. All apexes expressed concerns over the current wording of the proposal, which, they said, risks leading to unequal treatment of European agri-co-operatives, in particular, concerning profits allocated to reserves that cannot be allocated to members even after the extinction of the co-operative, and remuneration (for example, benefits, patronage dividends, interests on shares) granted by co-operatives to their members in proportion to their mutualistic relationship. 

They pointed out that the Commission should amend the rules on the regime of non-distributed profits and that on deductible expenses to take into account the specific nature and particular objectives pursued by co-operatives, distinguishing them appropriately from multinationals and other profit-making enterprises.

Meanwhile, EACB said it would welcome an actual decrease of compliance burden and the introduction of a One-Stop-Shop, but warned that attention should be paid to the fact that audits would continue to be conducted at the national level. The apex argued that such an arrangement may potentially lead to lengthy discussions or even permanent disagreement. It also stressed the importance of aligning tax considerations with local capital adequacy regulations for entities operating in the banking and insurance industries.

All submissions can be read on the Commission’s website.