EU tax harmonisation back on agenda

THE issue of harmonising tax rates across the EU has been put back on the table by members of the European Parliament when discussing proposed legislation on the consolidated corporate tax base.

Ireland has been battling against efforts that would force it to raise its 12.5% tax on companies because it is one of the main means of attracting multinational corporations into the country, according to the Government.

But Taoiseach Enda Kenny had to agree to consider the Commission’s proposal to provide a single method for companies based in the EU to assess their tax liability. It does not include harmonising tax rates, but Ireland has long seen it as a method of introducing this by the back door.

The Parliament’s economic and monetary affairs committee began its examination of the common consolidated corporate tax base proposal yesterday, and most MEPs were critical of the draft, saying the Commission should have gone further.

French Socialist MEP Liem Hoang Ngoc argued that all countries should have the same tax rate and was critical that the draft did not include this. “This shows that the Commission is giving preference to corporate interests to the detriment of citizens,” he said.

He was joined by Sylvie Goulard, a French member of ALDE, the liberal group. She argued that more corporate tax harmonisation was needed to make the single market more effective.

“It should be possible for eurozone member states to go further — after all the Euro Plus pact already calls for more tax coordination,” she pointed out.

Belgian Green MEP Philippe Lamberts suggested that they should consider proposing corporate tax bands like there are for VAT with minimum and maximum levels specified.

He also wants the committee to sound out the parliament’s powerful political groups, urging them to look at greater harmonisation of the tax rates rather than limiting themselves to the Commission’s proposal for the calculating base.

Fine Gael MEP Sean Kelly warned against harmonising tax rates.

“We need to sort out the crisis before we begin to suggest such major changes as a common tax rate that will only add to the uncertainty. We give the impression we are jumping ahead into the future before we have even got to grips with and assured our future,” he said.

The current proposal sees the EU-wide tax base being available to companies alongside national methods of calculating tax liability and allowing companies choose which to use. However some members of the committee believed only the EU base should be allowed operate.

The person responsible for drawing up the report for the committee, Belgian European People’s Party MEP Marianne Thyssen, urged a more conservative approach:

“It does not help to push further than we can really go now. we need to adopt a more realistic approach,” she said.

The Government signed up to considering more tax coordination in the Euro Plus Pact produced by France and Germany and which it felt obliged to sign up to at the time it was seeking bailout funds.