This analysis examines the possible consequences if Danish Companies to a greater extent are subjected to pay corporate tax according to where they generate their sale revenues rather than – as today – according to where the companies generate their profits. It is relevant since the European Commission has proposed a common consolidated corporate tax base in the EU (CCCTB), as well as special tax on US IT giants based on EU sales revenues.
The analysis demonstrates that the largest Danish companies (C20 companies) pay 56 percent of their total corporation tax in Denmark, while only 11 per cent of their sale revenues are generated in our country.
If corporate taxation was based on where the companies generate revenue, this would result in a reduction of DKK 14 billion for the Danish treasury in the case of the C20 companies, corresponding to a decrease of almost 80 per cent. This indicates the Danish treasury stands to lose, if corporate sales revenues were to play a role for allocating tax revenues, as proposed by the Commission.
“Large Danish companies are very similar to the US IT giants. Much of their income today derives from intellectual property rights. If you start levying special taxes on IT giants, Denmark could find itself in an unfavourable position,” says Otto Brøns-Petersen, Director for analysis at CEPOS.
“The European Commission's common corporate tax base proposal is not good tax policy, and it is definitely not in the interest of Denmark, and should continue to be rejected by the Danish government. Furthermore, proposals for special taxation of IT companies by the Commission and certain Member States are in reality protectionist trade policies, which Denmark should continue to reject. The proposals run the risk of causing issues of double taxation and triggering US tax penalties,” says Otto Brøns-Petersen, director at CEPOS.