EU seeks support to harmonise corporate tax

The European Commission will today issue a plea for member states to offer more support for its controversial strategy to harmonise the corporate tax base in the EU.

It will also propose making its plan for a common corporate tax base system an option for companies rather than insisting that they sign up to the common system.

An updated strategy, which is due to be published today by tax commissioner Laszlo Kovacs, shows the commission is concerned about the slow progress on the tax plan.

It warns that there may now be a delay in implementing the measure, in effect signalling that it is encountering strong opposition to the plan from some member states.

It highlights that member states' experts involved in a number of commission working groups on the strategy are setting out to defend aspects of their own tax systems rather than attempting to find solutions applicable across the EU.

Some member states are also committing less resources than others to the work of the commission and there is a tendency to postpone difficult discussions.

Mr Kovacs is planning to harmonise the hundreds of different elements that are used by states to calculate corporate tax rates, commonly called the corporate tax base. He has already enlisted the support of the holder of the current EU presidency, Austria, to push the strategy and says about 20 EU states support him.

However, at least five member states are hostile to the plan, which they believe could result in the harmonisation of corporate tax rates by the back door.

Ireland, Britain, Slovakia, Estonia and Lithuania are understood to be against the harmonisation plan, which Mr Kovacs wants to present as a legislative proposal in 2008.

Mr Kovacs' commission colleague, Charlie McCreevy, is an outspoken critic of the strategy, which he fears would reduce tax competition between states.

The updated strategy, due for publication today, will seek to allay some of the fears surrounding the plan by proposing the harmonised base as an optional system.

This means that, initially at least, firms could either choose to sign up for the common tax base or continue to use the existing tax base in a member state.