Multinationals across EU largely favour harmonised tax base

MULTINATIONAL companies across the EU favour a harmonised tax base and tax rates, according to a study from KPMG. Finance heads in more than 400 firms with turnover of more than €700 million were canvassed.

KPMG’s Sue Bonney said they were surprised at the 79% support for a common consolidate tax base and at the 69% support for a single rate.

“This is a very clear vote from business in favour of a simpler tax system, even if it requires companies to give up the benefits of choosing between the tax regimes of different countries.”

While firms in most countries believed it would not change the amount of tax paid, half of those in Ireland believed it would increase tax liability.

Ireland has the lowest corporate tax rates in the EU at 12.5% against the average of 24%, with France having the highest at more than 33%.

Tax Commissioner Laszlo Kovaks will propose a harmonised tax base next year where companies can choose to calculate their tax liability for branches in different member states according to one criteria. This would replace the 27 existing systems. Tax would be distributed to states on the basis of sales, non-financial assets, labour force or a mixture of the three.

Internal Market Commissioner Charlie McCreevy says the system would not work and would lead to a single EU corporate tax rate, ridding countries like Ireland of a tax advantage when attracting business.

However, a mere 30% of the top 10 Irish companies said they would not opt to use the common base if it was available while 60% said they did not know if they would.

A greater percentage of the Irish respondents (60%) compared to the average (41%) said it would make companies more competitive in global markets and would raise revenues (70% Ireland, 19% average). On the general idea of a harmonised tax base, half the Irish firms believed it would never come to pass with the other half plumping for 2015. A mere 15% of the overall survey of 400 companies said it would never happen while the most popular date was 2015.

Austrian firms were unanimously against having a single corporate tax rate across the EU followed by Ireland at 80%. France was 90% in favour, followed by: Italy (84%); Germany (70%), and Britain (48%).