Verheugen backs corporate tax plan

Günter Verheugen, the European commissioner for enterprise and industry, said this week that he would back moves to introduce a common method for calculating corporate tax, even if member states such as Ireland, the UK and Slovakia end up being excluded from the new system.

László Kovács, the taxation commissioner, will present proposals on a common consolidated corporate tax base in mid-2008. The plans, aimed at reducing the administrative burden on companies complying with different taxation regimes, have been criticised by national governments fearing that they will lose sovereignty in a sensitive area. The Commission protests that it seeks only a common tax base, not harmonised rates of tax, but its detractors warn that the scheme may be used as a Trojan horse for the introduction of common corporate tax rates.

Kovács has already made it clear that he would welcome use of ‘enhanced co-operation’ as a means of introducing the scheme. Under the 1999 Treaty of Amsterdam, member states may request use of the legal instrument to proceed in adopting laws in areas like taxation that would normally require unanimity. The procedure has never before been used.

"If Mr Kovács says this is an option then he can always count on my support," said Verheugen. He specified, however, that any use of the enhanced co-operation would have to be "neutral as regards competition".

The harmonisation of tax-rates feared by critics of the scheme was, he said, a "non-issue" that could not work.

"With my responsibility for 24 million European enterprises, several million of them doing cross-border business...the fact that we have 27 different tax bases is a problem. I wonder a little bit where the resistance comes from, particularly from our British and Irish friends, who are normally very much in favour of cutting red-tape and making it easier for business to do internat-ional trade. In my view that is not a fully comprehensible position," he said.

A European Commission official said: "We just want to find common methods to simplify and find transparent methods across the EU. If we don’t have unanimity and are asked to pass it through enhanced co-operation, then we will do it."

Simone Ruiz, a policy adviser at BusinessEurope, saidthat while a harmonised system bringing together all 27 member states would be a preferred outcome, enhanced co-operation could be considered a feasible last resort for pushing through proposals. "It could have a strong pull effect on other member states," she said. "Some international companies may only want to invest in countries with a common corporate tax base. This is why the Commission would be pleased if member states request enhanced co-operation."

Günter Verheugen, the European commissioner for enterprise and industry, said this week that he would back moves to introduce a common method for calculating corporate tax, even if member states such as Ireland, the UK and Slovakia end up being excluded from the new system.