IBEC rejects EU tax proposals

IBEC has reiterated its opposition to attempts by the European Commission to introduce a Common Consolidated Corporate Tax Base (CCCTB).

IBEC believes that the most recent proposals published today, contrary to Commission claims, would not strengthen the competitiveness of the EU and would be particularly damaging to the economies of smaller member states such as Ireland.

IBEC Chief Economist David Croughan said: "This proposal would almost certainly lead to an increase in companies’ tax bills by transferring taxable profits to the regions with large populations. This would also result in lower revenue from corporation profits in smaller countries, which could lead to other taxes being increased to offset this loss of revenue.

"It would effectively result in a transfer of resources from smaller countries to larger ones.

"In the case of Ireland, which exports the greater part of its output to the larger central economies of the EU, companies would see part of their profits, currently taxed at 12.5%, apportioned to other higher-taxed member states such as Germany or France.

"Such countries, who have made no secret that they see the introduction of CCCTB as a first step to tax rate harmonisation, would benefit from higher tax revenue earned by companies located in Ireland.

"The effective transfer of part of corporation tax to a sales tax would not reward the more efficient producers.

"This flies in the face of the EU’s goal to make Europe the most competitive economy in the world.

He went on to say that the introduction of CCCTB will generate uncertainty in taxation, to the detriment of foreign direct investment and said that the proposal would reduce the flexibility of the EU's corporate tax system.

"A flexible tax system is a prerequisite for a competitive economy. Policy makers must be able to react rapidly to changing economic circumstances and developments in other tax jurisdictions.

"The CCCTB will ultimately reduce the flexibility of the EU’s corporate tax system as the agreement of a large number of member states will be required in order to make any changes. The additional administrative layer will also make change more difficult."