McCreevy to fight EU’s single tax proposal

EU internal markets commissioner Charlie McCreevy will break ranks with his fellow EU Commissioners today when they discuss introducing common rules for calculating company tax across the EU.

Work has been ongoing for the past six years on what is known as the Common Consolidated Corporate Tax Base (CCCTB) and a final proposal will be made this time next year, in 2008.

But the debate has ignited in recent weeks and become particularly intense with Fianna Fáil making it an issue in the general election.

Germany, France, Italy and Spain all favour CCCTB as does the President of the European Commission Jose Manuel Barroso. They argue that companies with subsidiaries in different member states have increased costs when they have to pay tax on a different basis in each country and that this makes Europe less attractive as a business location.

But Ireland, Britain, Latvia, Lithuania and Estonia with much lower rates of corporation tax than most other countries are vehemently against the proposal and see it as a way of eventually insisting on a single EU company tax rate.

Dublin MEP Eoin Ryan met the Taxation Commissioner Laszlo Kovacs in Strasbourg last week with representatives of Irish business and banking interests to object to the proposal.

“These are ill-conceived, divisive proposals and are part of a process to attack Ireland’s low corporation tax rate”, Mr Ryan said in a statement yesterday.

But Mr Kovacs insists that he is very pleased with the work already done on the proposal and that he expects all stakeholders will support the concept when it is finalised next year.

He is due to report today on the progress made over the past year in resolving the problems around such a massive undertaking as drawing up tax rules that could be applied in every member sate.

Since tax is an issue only for individual member states any country can veto any proposal that could interfere with taxation.

Countries can opt for a CCCTB under what is known as the enhanced cooperation agreement when eight or more countries can come together and agree to adopt a specific measure among themselves.

But Irish politicians and former Finance Minister Charlie McCreevy have warned that this could be the thin edge of the wedge and that Ireland could find itself under pressure to introduce the same tax rate.

IBEC’s chief economist David Croughan warns that a small country like Ireland could be severely disadvantage under the proposed scheme.