The European Commission has put forward changes that would “harmonise” some national rules around tax and insolvency as part of a much hyped plan to allow businesses to quickly incorporate a new company on an European Union-wide basis.
The proposal, drafted by European Union (EU) commissioner for justice Michael McGrath, is intended to make it easier for new companies to expand, and raise investment cash across the EU beyond national borders.
The scheme, called “EU Inc”, is one element of a broader bid by Brussels to make Europe more economically competitive. National governments have traditionally been very resistant to attempts by the commission to encroach into sensitive areas concerning tax and insolvency law.
McGrath said that what was being proposed was a “targeted” and “optional” new structure, offering a “harmonised” set of corporate rules for European businesses.
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The reforms would line up differing national laws on when employees pay taxes on stocks and shares they hold as part of their employment contract. A single standard would see the tax paid at the point the stocks are sold.
The EU’s executive body also proposes to create a new “simplified” insolvency system across the bloc for companies deemed to be “innovative” start-ups.
[ McGrath wades into politically fraught tax watersOpens in new window ]
To qualify firms would have to be less than 10 years old and spend a certain portion of their outgoings on research and development, or show they were developing an exciting new product.
The pared back insolvency process would let people wind down failed ventures quickly, without having to spend fees on lawyers and insolvency practitioners in the process.
The reform, previously known as the “28th regime”, does not propose to touch corporation tax, or sync up employment law or workers rights.
“EU Inc” companies would have to designate a base member state where they would have an office, be legally liable and required to follow national employment laws.
In an interview with The Irish Times and a number of other media outlets, McGrath said there was a lot of pressure on Europe to become more economically competitive. The proposed reforms “won’t resolve everything” but could be “transformational”, if they got the backing of national governments, he said.
“As you know, this has been attempted a number of times in the past and never successfully ... If we don’t do it now, I would question when it will ever be achieved,” he said.
“It is the case that when it comes to many member states, they warmly welcome the company law proposal, or company law elements of the proposal of EU Inc. Some are more circumspect when it comes to issues in the area of insolvency, taxation and labour law, which I completely understand,” the former Irish finance minister said.
McGrath said the union’s executive arm had made a “very conscious decision” that its EU Inc plan would not wade into the “sensitive” realm of labour law.
The commission plan will need the backing of a sizeable majority of EU states, plus the European Parliament, to come into force.
It is envisaged the vast majority of companies that would avail of the scheme would be new, rather than existing businesses.
Internal commission projections estimate about 66,000 companies might be incorporated using the new EU-level structure annually after 10 years of it bedding in.
“This is something that we have been waiting for for a very long time, an optional European company framework to allow companies to operate across the single market under one coherent set of corporate rules,” one EU official involved in drafting the proposal said.
Under the proposed framework people would be allowed to register an EU Inc company and have it set up within 48 hours, online, for less than €100.
