Germany argues for EU tax rates

German finance minister Peer Steinbrück has called for a "fair settlement" to the EU's ongoing internal dispute over tax harmonisation. His remarks have started alarm bells ringing around Europe, notably Dublin, where the Irish Taxation Institute has called for united opposition to an EU-wide corporate tax rate.

"We have to finally come to a single European co-ordination of tax policies - including the area of direct taxes - if we in Europe want to actively shape finance policy," Mr Steinbrück told a conference of tax experts in Berlin.

"For me, harmonisation means intelligent, exact shaping of common frameworks, by which no one can be felt to be a winner or loser, rather from which we all profit together."

Berlin is anxious to add political momentum to European Commission plans for a common consolidated corporate tax base. Earlier this month, EU tax commissioner László Kovács said to expect a proposal next year calling for a common base some time "after 2010".

Companies that adopt this tax base for their EU activities, rather than tackle the 27 different member state regimes, will face lower compliance costs and help boost the single market, according to the commission. Promises to allow national exchequers to continue to set their own rates are viewed with mistrust in Estonia, which has a flat tax system, Britain and Ireland.

"Despite whatever official pronouncements that this is not a backdrop to a common tax rate, we believe it is and we believe it would be bad news for Ireland and the wider European Union," said Mark Redmond, chief executive of the taxation institute.

He said harmonisation proposals remain vague and would damage Ireland's competitive corporate tax regime by bringing higher tax rates by the backdoor.

"Mr Kovacs has yet to come up with any evidence that the proposals would reduce costs; we are calling for an impact assessment as all indicators so far show harmonisation would increase costs," said Mr Redmond.

A report complied by Oxford University's Centre for Business Taxation has found that tax harmonisation could produce surprising results.

Countries most in favour like Germany are likely to lose tax revenue while opponents like Britain and Estonia would be financial winners. "Ireland . . . would not lose at all from the introduction of the new system."