Push to introduce pan-EU business profit tax

Thu, Jan 13, 2011, 00:00

EUROPEAN COMMISSION chief José Manuel Barroso has dismissed mounting Irish opposition to the development of pan-European rules on the taxation of business profits, saying the EU’s executive branch would not be swayed from its objectives.

A new Irish submission to Brussels argues that legislation to create a common consolidated corporate tax base would impede economic growth in Europe and threaten hundreds of thousands of jobs.

However, Mr Barroso said that the creation of a common corporate tax base was essential for the revival of Europe’s economy. He also indicated that the commission was determined to press ahead with the publication in March of legislation to establish it.

The consolidated base would not harmonise corporate tax rates but the Government believes it would weaken tax competition by reallocating tax receipts to countries where revenues are received.

This would reduce scope for maximising profits that companies record in Ireland, one of the key attractions of the present system, lessening the benefit the Government derives from its low 12.5 per cent corporate tax rate.

Although the Government has argued that such an initiative would seriously damage Ireland’s recovery prospects and threaten further budget cutbacks and tax increases, Mr Barroso was unwavering in his support for the plan.

“Yes, we are thinking about going ahead with the CCCTB. It makes sense. Once again it is not, as I know some of our friends in Ireland fear, fiscal harmonisation,” he said.

“It is an indispensable part of co-ordination, and this is good for the internal market. It’s good for growth all over Europe. It simplifies the life of businesses, namely small, medium companies to have as much as possible a harmonious base for taxation.

“So we are preparing it, and we think this is part in fact of the reinforcement of our economic governance and to address some of the imbalances we have also in Europe.’’

The tax base plan was first aired in 2001. Political agreement among member states proved elusive and it was withdrawn in mid-2008 in the wake of Ireland’s rejection of the Lisbon Treaty.