Austria seeks tax allies

By Anna McLauchlin

Date: 23/02/06

The Austrian finance ministry is rallying support for a proposal that would let companies with operations in more than one EU state file their tax returns using common tax rules.

The holder of the EU presidency wants backing from the Council of Ministers for a common consolidated corporate tax base (CCCTB) and to co-ordinate member states' positions.

Finance Minister Karl-Heinz Grasser said recently that according to initial opinion gathering, 22 of the 25 member states would consider committing themselves to some form of harmonised tax base.

An Austrian official, stressing that the plans were at a preliminary stage, said: "The issue is an important priority for us. We are considering setting up a high level group of experts that would put together some questions for ministers at the [EU Finance Council]."

The group would have a "longer-term vision", the official said, as Finland and Germany, the next two countries to head the Council of Ministers, are also supportive of the CCCTB.

Tax experts in the European Commission will publish a communication in April on CCCTB, spelling out their intention to adopt a proposal some time in 2008. Their next meeting is planned for 9 March.

CCCTB supporters argue that the system will make companies with pan-EU activities more efficient by allowing them to calculate the income of an entire group according to one set of rules. By establishing consolidated accounts, companies could also eliminate the potential tax effect of internal transactions.

But EU tax law requires the unanimous approval of member states, and the UK and Ireland have already said that they do not support tax harmonisation at any level, fearing that it will fuel political pressure to bring tax rates closer together.

The proposal would harmonise rules on the tax base but would not, at this stage, harmonise tax rates.

The Czech Republic is also opposed to the CCCTB. Some new member states have used low corporate tax rates and tax breaks to attract foreign business to boost their economies.

If the Commission, working with the presidencies, decides that a traditional proposal will not fly, it might be tempted to publish a proposal for a group of member states willing to harmonise their tax rules under the EU rules of enhanced co-operation.

In this case, a minimum of eight states have to agree on a proposal, which would have to secure qualified majority approval in the Council and consult the European Parliament.

In either case a final proposal is likely to take time. The Commission's working group has already established that a new tax base should be broad and have fewer incentives and tax breaks than the current national tax bases.

It is now working on three main structural elements of the base: fixed assets and depreciation, reserves, provisions and liabilities and tax- able income.

"Legislative procedures take time and it is a very complicated topic," said a Commission spokesman.

Article reports that the Austrian Presidency of the EU was seeking support for a proposal that would let companies with operations in more than one EU Member State file their tax returns using common tax rules.