EU attempts to introduce common tax calculation could ‘undermine the Irish economy’

PLANS to harmonise the way corporate tax is calculated across the EU will undermine the Irish economy, Fianna Fáil MEP Eoin Ryan has warned.

European Tax Commissioner Lazslo Kovacs will outline a draft proposal for a common consolidated corporate tax base (CCCTB), next Wednesday, that will be discussed by finance ministers in June.

He plans to bring forward a proposal next year that will continue to allow every country set its own tax rates but harmonise the way liabilities are calculated giving business a very clear picture of how tax regimes compare in each member state.

It should also facilitate companies with branches in other EU countries, as under the draft proposals liabilities will be calculated at EU level and repaid to the relevant member state rather than companies having to conform to the varying rules of each country as at present.

Ireland has one of the lowest company tax rates in the EU at 12.5% and credits this for attracting the huge amounts of foreign investment into the country.

The commissioner has said opting into the CCCTB will be optional for every member state, but Mr Ryan said this would inevitably lead to pressure to have the same tax rate across the EU.

After his meeting with Mr Kovacs, Mr Ryan said: “Some countries such as Germany, France and Italy are demanding that a mandatory system for a common consolidated corporate tax base be put in place and that the issue of harmonised tax rates be included in such a proposal.”

He said he did not believe in assurances that a common consolidated corporate tax base will only be optional because those who support CCCTB want to introduce common corporate tax rates too.

“Let’s face it — Ireland has a battle on our hands to stop common corporate taxes being introduced in Europe,” he said.

Ireland is not alone in resisting attempts to introduce a CCCTB as Britain and several of the new member states are also opposed to the proposal.

Internal Market Commissioner Charlie McCreevy has repeatedly warned against a CCCTB and said it would be the thin end of the wedge towards a single corporate tax rate.