Common corporate tax would 'push up costs'

 

AMBITIOUS PLANS for a pan-European corporate tax system that gained new momentum at a summit of European leaders on Friday could push up compliance costs for multinationals, a report for Irish business groups states.

Angela Merkel, the German chancellor, and Nicolas Sarkozy, France’s president, listed the creation of a common corporate tax base as part of their controversial plans for closer economic co-operation.

The European Commission is due to give details of the proposals next month.

Under the proposed common consolidated corporate tax base, or CCCTB, businesses would be given the option to use a single regime instead of the European Union’s 27 different corporate tax systems.

Under CCCTB, the tax bills of companies who have offices around Europe would be calculated centrally.

Their taxable profits would be carved up between the member states they operate in according to the size of their business in those countries, which would retain the right to set their own rate of tax. This should, in theory, reduce administrative costs.

But research by Ernst & Young suggests the CCCTB would push up average compliance costs by 13 per cent.

Under the proposals, companies that keep brands and other intellectual property in Ireland but have large manufacturing plants or big sales elsewhere could pay more tax outside Ireland.

Chris Sanger, head of tax policy at Ernst & Young, said: “The CCCTB would reduce the benefit of having a lower rate.”

The research reinforces the negative message of another recently released Ernst & Young study commissioned by the Government, suggesting that CCCTB would result in the loss of, at least, 200,000 jobs across Europe.– (Copyright The Financial Times Limited 2011)