Call for EU tax harmonisation within 18 months

Ann Cahill

Ireland, Britain and a number of the new member states have been battling any form of harmonisation of company tax rates.

But other countries have been pushing for at least a minimum rate of Corporation tax to be imposed throughout the EU.

They claim that attractive low rates of tax, such as Ireland’s 12.5%, are offering unfair competition for foreign investment and encouraging companies to relocate.

Irish and British finance ministers have been more willing to concede on harmonising the tax base however in recent months.

Kovacs said he raised the issue yesterday in Luxembourg during a meeting between the Commission and the new Luxembourg Presidency representing member states.

“We did not have time for a full discussion on the issue, but it needs to be done as soon as possible. We have to work hard to achieve the necessary compromises.... I hope it can be done within 18 months, I think that is realistic,” he told the Irish Examiner.

A harmonised corporate tax base would introduce far more transparency into the tax system and allow companies to better compare what is on offer in the different member states.

At present, the Netherlands has the lowest effective rate when all the items a company can claim against tax are taken into account.

Luxembourg Prime Minister Jean Claude Junker indicated his country would not stand in the way.

“In the past when Europe made major progress on tax issues it was under the Luxembourg presidencies,” he said.

The decision to work on harmonising the tax base was taken late last year.