EU to speed up plan for common tax base

EUROPE’S TAX commissioner is moving to accelerate the adoption of a pan-EU business tax system, an initiative viewed with deep scepticism by the Government.

Algirdas Semeta, a former finance minister of Lithuania, will decide by June whether it is possible to achieve unanimous agreement among the 27 EU countries to establish a common consolidated corporate tax base (CCCTB).

Denmark’s newly-installed rotating presidency of the EU has agreed to proceed on this basis, he said.

If unanimity is not feasible, Mr Semeta is prepared to back an “enhanced co-operation” procedure in which a coalition of EU member states would operate a common tax base between them.

Mr Semeta told reporters in Brussels yesterday that such a system could be set up within one year of the countries in question entering talks.

“Technically, of course, it could be done in a year,” he said.

“My wish is to have this proposal adopted in the form of agreement at the level of the 27, or in the form of enhanced co-operation as soon as possible.”

His intervention comes as France and Germany press to speed up talks on legislation to establish a common tax base, a project Taoiseach Enda Kenny once dismissed as a “back door” route to tax harmonisation.

“I think that it’s very important to de-dramatise the debate and to focus discussion on actual proposals,” Mr Semeta said. “This is clearly not an attempt by Brussels to introduce a minimum corporate tax rate through the back door.”

He argued that Ireland has nothing to fear from an EU-wide common tax base and insisted there was much to gain.

“The proposal is very good for the Irish economy,” he said.

In spite of Ireland’s doubts about the common tax base, Mr Kenny has pledged to his European partners that the Government will constructively engage in debate on the legislation.

A common tax base would not harmonise tax rates but it would create a pan-European tax system for firms operating in more than one country.

Dublin fears this would dim the lustre of the Irish regime by making it more difficult for multinationals to take advantage of the low 12.5 per cent tax rate.

Further Irish concern surrounds the creation of a common tax base by an alliance of countries, as that too might reduce the scope for multinationals with operations in some of those countries to make use of the Irish system.

With unanimity considered unlikely, the commissioner has now adopted a line very similar to that of France and Germany.

Asked to what extent was he aware of the efforts of those two countries to speed up debate on a common tax base, the commissioner said he was in touch with all member states at all times.

“I see that many, many member states want to have substantial progress on this file,” he said.

“I didn’t hear that Ireland is not constructive.”

Mr Semeta introduced a formal legal proposal to set up a common tax base last year but the political debate was always considered likely to continue for some years to come.

Now, however, the commissioner believes it should be possible within months to make a decision as to whether it is possible to proceed to the next phase of the debate.

“The CCCTB as such will create much more transparency in taxation systems European wide but currently the tax rates do not mean much because member states are very different in terms of tax exemptions, in terms of broadness of tax base,” he said.

“And, of course, it is very difficult to compare the actual rates so if we come to an agreement on CCCTB, that would create a common base across and then of course the corporate tax system would become much more transparent and understandable to everybody.”