Corporate tax plan would save firms €1.3bn, says EU

A COMMON EU-wide corporate tax system would save companies €1.3 billion in the first year but would cause a loss of revenue to member states, according to the European Commission.

However, it expects the one-stop-shop system would increase growth, jobs and revenue for member states as businesses would reinvest the money saved and more companies would expand across borders.

Reaction to the long-awaited Common Consolidated Corporate Tax Base (CCCTB) proposals was mixed, with the business group IBEC and the US Ireland chamber of commerce rejecting them as their counterparts in Brussels welcomed them.

A statement from the Department of Finance said: “We remain sceptical about many aspects of CCCTB but we will work constructively with the commission and the other member states on the issue.”

Europe Minister Lucinda Creighton said the Government would look at the proposals and engage in discussions on it but that it would not support anything that would inhibit flows of foreign direct investment (FDI) into Ireland.

Ireland, Britain and a number of countries with low-tax rates, including Malta, Cyprus, Slovakia, Bulgaria and Poland, do not favour the proposals while Germany and France in particular are supportive.

Presenting them to journalists in Brussels, Taxation Commissioner Algirdis Semeta said the economic crisis has hit business hard and they need all the support and assistance they can get to recover and rebuild.

The commission believed the plan would help create an environment that encourages enterprise, innovation, investment and growth that is essential for European prosperity as a whole, and the vast majority of European business supports it.

“I do not understand why some of us are so worried about it. It would lead to greater transparency, and once it’s introduced it would be clear what are the effective corporation tax rates in member states and that will lead to fairer competition between member states.”

He insisted it was not an attempt to harmonize tax rates and believed that every member state would be a winner from the proposals.

But the American Chamber of Commerce Ireland said it believed this was harmonisation of tax by the back door. It believed that as it broadens the tax base it would result in increases taxes on companies doing business in the EU.

It and IBEC warned that once the tax liability of a group with companies in different member states is assessed according to the common criteria, the way the commission proposes to apportion the money to each country involved would lead to cross-border disputes and complicate doing business in the EU.

They noted one significant flaw was that intangible assets such as intellectual property would not be taken into account in deciding how much of the money would go to the relevant state. This would militate against Ireland in particular, with so many of companies, such as Google, involved in modern commerce where intellectual property can be the most valuable asset.

“From an Ireland economic perspective, they are likely to introduce an increased tax burden on Irish-based companies exporting into the European market… It is also introducing uncertainty with investors which could drive investment to countries outside the EU such as Switzerland and Asian states.”

IBEC director general Danny McCoy said there was a danger many businesses would end up paying higher corporate taxes.

Chartered Accountants Ireland, which produced a major report critical of CCCTB, said that with tax yields in decline in many member states, it believed countries would be very slow to tamper with corporation-tax systems.