Tax-dodge laws harming single market

Date: 13/06/02

MEMBER states' laws designed to stop firms evading tax by banking profits in another country are harming the single market and could be thrown out by the European Court of Justice, says Europe's accountancy profession.

The Fédération des Experts Comptables Européens (FEE) believes a legal challenge is 'only a matter of time' as some companies risk being taxed in two countries on the same profits.

'If such a challenge is successful it will result in a considerable revenue loss for those member states that are relying on...legislation to eliminate distortions in the allocation of investment,' says the organisation.

FEE tax expert Terry Browne said one option would be for EU members not to use the tax laws against firms with foreign operations which meet the terms of a code of conduct drawn up by UK tax minister Dawn Primarolo.

This code would reduce the incentives for firms to book their profits outside their home market.

At the same time, he said, EU countries should adopt similar laws

on the taxation of operations outside the Union.

This would tackle distortions to the single market, which currently encourage companies to move to member states with the most generous tax regimes. The FEE represents 38 professional bodies from 26 countries, with a combined membership of 450,000 people.

Member States' laws designed to stop firms evading tax by banking profits in another country are harming the single market, according to the Fédération des Experts Comptables Européens (FEE).