Last Monday, at the inauguration of a car components factory in Ramnicu Valcea (180 km West from Bucharest), someone yelled from the last row, 'wage of 200 euros?'. The report has been viewed over 25,000 times and has 150 comments so far - a reaction that undoubtedly reflects a certain state of mind. We're in a country that celebrates in a couple of months 10 years since it joined the EU, but we still don't feel inside in terms of wages, and implicitly of living standards. The economic reason for this net wage of 200 euros – as we still much rely on the minimum gross wage of 276 euros to draw investors – does not feed, warm or educate; it does not pay any installments or vacations, nor does it improve the mood that pushed the guy to ask why this is all he takes home.

The state of mind I mention has become an important economic variable in our days. The état d'esprit was also mentioned by European Commissioner Pierre Moscovici (Economic and Financial Affairs, Taxation and Customs), a Leftist Frenchman of Romanian origins, now the main voice of the tax revolution under preparation on a EU level. "We have a strong asset that was not present five years ago – it is the mood in the public and the scandals, which give us some strength. Clearly today the public cannot stand that multinationals do not pay their fair share of taxes, while ordinary citizens did in order to reduce deficits," he said in an interview to major European media. In these terms, he announced that in late October or early November we should expect… the CCCTB.

So, finally: the Common Consolidated Corporate Tax Base, aka the CCCTB is making its grand entrance, and there's no way back! I try to explain on every occasion what the CCTB is, ever since June last year, when Brussels released a 1min10sec video setting up the milestones of a Europe where citizens were very upset, because "a cross-border company in the EU pays on average 30 per cent less tax than a similar company active in only one country. Now, research suggests that if one country increases its corporate taxes, profits that companies declare before they actually pay those taxes decrease. That's because the profits are shifted elsewhere." This is why "out of 100 Europeans, 88 support tighter measures against tax avoidance and tax havens." And because they want it, they clearly want the CCCTB (i.e. they won't oppose to it). Thus, the European multinationals will find in every member state where they operate the same rules for calculating their profits, which will be totaled for the group, then – based on an algorithm – split between the states where it was obtained (see the article here - a Romanian version)
This will calm down people, even make them happy, the Brussels strategists thought, basking in their own brightness. Is that so simple, indeed?

The upsetting is essentially based on the fact that – surprise?! – we all need the money (state budgets and private budgets/pockets equally), to quote the head of the OECD, who synthesized the philosophy of new tax revolutions. These revolutions were fueled by revelations, by information leaks (from Luxemburg, from Panama, now also from the Bahamas) and by investigations (some worth several billions, such as the already famous Apple case). All these contributed to the critical level of the state of mind, urging to do something.
That’s how – after two years of talks on the final form – the BEPS plan (against the Base Erosion and Profit Shiftin) was done, and is now in the implementation phase. It aims at increasing the transparency of global business, by detailed reports on the groups' businesses in every country where they operate. CCCTB wants more: to change the very businesses, their model. This is precisely why there were (official) talks about the CCCTB over the past 16 years (it was seen as a priority of the 2nd Barroso Commission), and it's easy to understand why member states did not appreciate what Commissioner Moscovici called "probably the most ambitions tax reform ever devised" and "the real prize for businesses". So it's not that simple, after all.
While the big states worry about the CCCTB profit splitting algorithm, the other states, before the profit consolidation and allocation, could have a problem with the common taxation base. Countries like Romania will no longer be able to use arguments like "we're more attractive because we have accelerated amortization", and "we have a lower tax rate" will actually become void!

Is this connected with the 200-euro wage? Very much so! When an investor finds the same taxes in Ratzeburg and in Ramnicu Valcea, what will our arguments be?…

Last December, upon the appointment of the incumbent government, made up of people who know what Brussels means, I was thinking they'll force Europe down our throats. I was not expecting the minimum wage to be raised to 400 euros, e.g. like in Croatia (see the EU statistics here) it the economy cannot sustain this level. But this government could and should have joining the major European teams, putting Europe on the domestic public agenda!

Meanwhile, the tax revolution will be done, and not owing to the ambitions of European commissioners: if today's path leads to more Europe, it cannot be achieved without a common tax policy. So I don't imagine we as a state could fight the inevitable (it would also be counterproductive). I imagine, however, that despite its lack on the domestic public agenda, we're having a fight at least on the finance ministry's level, on the algorithm, on fractions of percentages; I imagine we're seeking the European compromise that takes into account the development needs of our economy, too. I also imagine that we're searching for new arguments to replace the old ones. What if we could tell investors, "you might search throughout Europe and not find more business-friendly tax authorities than Romania's, with clearer procedures and verifications"? Now wouldn’t that be nice?...
To conclude, I'm as confident as ever that beyond our day-by-day problems, our present and especially our future is also dealt in Brussels. "How are we playing in Europe?” is an all the more actual question, as we have so many people who have to live on 200 euros per month.

P.S. Talking about arguments to encourage investments: last week, Italy has passed the "Piano Nazionale Industria 4.0", a plan to develop industry based on new technologies. Nothing spectaculars (all Western states have such plans), except for the tax incentives proposed for the next year's budget. The percentages mentioned are remarkable, but not as much as the imagination in combining leverages. For instance, a 250% hyper-amortization is proposed to investors in technology, agrifood, equipment to boost the energy efficiency; there is a one-year prorogation of the super-amortization of 140% for investments in capital goods, other than transportation means (hyper- and super-amortization can operate until mid-2017); tax credits of 50% (up from 25%) for R&D expenditure above the company's past three-year average; tax exemptions of 30% for investments up to one million euros in innovative SMEs; and the possibility of the "sponsor" company taking over the start-up's losses for 4 years of operation. Even if Italian Ferrari is somehow tired, perhaps rusty (note the government debt of 130% of the GDP!), the skillful tax piloting can produce a chance to advance to the new economy, to the 4.0 level. Otherwise, one is left with the chance of keeping manufacturing Ferrari's upholstery. Which is OK, but… on a "wage of 200 euros?"

Article by Adrian Luca, TPS, published on, September 2016