Kovacs appeals for corporate tax plan

By Simon Taylor

Date: 30/03/06

Taxation Commissioner Laszlo Kovacs is next week to urge member states to back his initiative to harmonise the EU's corporate tax base.

On 4 April Kovacs will present the latest situation report from the Commission's working group on a common consolidated tax base.

The group has been working since September 2004 on the challenges and obstacles to creating a harmonised system across the EU, which, advocates argue, would provide a boost to the functioning of the single market and reduce administrative burdens for businesses.

The report will be discussed by finance ministers over lunch at the informal Ecofin meeting in Vienna on 7-8 April.

At the meeting, Kovacs is planning to ask ministers for renewed backing for his initiative, which was approved by ministers at the informal Ecofin in Scheveningen, the Netherlands, in September 2004.

But several member states including the UK, Ireland, Slovakia and the Baltic states are opposed to attempts to harmonise the corporate tax base, arguing that taxation policy, which is decided by unanimity, should remain an area of national sovereignty.

Kovacs is planning to present a formal proposal in 2008 but would like to bring forward the timetable if the expert group can speed up its work.

The tax commissioner would like to get agreement on a common tax base with the backing of all 25 member states.

But if some countries remain opposed, the commissioner is planning to propose harmonisation under the so-called enhanced co-operation procedure which allows member states to agree policy in smaller groups without the approval of all 25 countries.

Enhanced co-operation requires the support of eight states, it must be open to other countries to join at a later stage and must be approved by a simple majority of EU leaders at a summit. The other condition is that use of enhanced co-operation should not undermine the single market.

In a recent speech in Oxford, Kovacs said that harmonisation of the tax base would result in a "better functioning of the internal market in the reduction of compliance-costs and administrative burdens".

In particular it would help small- and medium-sized businesses which were hit "particularly hard" by tax obstacles, Kovacs said.

The initiative is strongly backed by a large number of countries including Austria, current holder of the EU presidency, France, Germany, Belgium, Luxembourg and Italy.

The expert group has been focusing on four main issues: assets and depreciation, reserves, taxable income and international aspects.

Other issues to be discussed at the informal Ecofin meeting include: economic patriotism or protectionism, reform of Ecofin working methods and the eurozone economic situation.

Article reports that the European Commissioner for Taxations and Customs Union, László Kovács, was planning to urge a group of reluctant Member States to give up their opposition to his initiative to harmonise the corporate tax base across the EU. On 4 April 2006 Kovács was to present the latest situation report from the European Commission's working group on a common consolidated tax base. The report was to be discussed by Eu Finance Ministers over lunch at the informal Ecofin meeting in Vienna on 7-8 April 2006.

• Primary Source

European Commission: DG Taxation and Customs Union: Company tax: Overview http://ec.europa.eu/taxation_customs/taxation/company_tax/index_en.htm

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