Franco-German plan to harmonise corporate tax unveiled

A French and German paper to convince the EU to harmonise corporate tax rates met with stiff opposition from a number of countries, including Austria that described it as a “missile”.

Several countries warned that such moves could increase corporate rates and damage tax competition between member states.

These points are similar to those being made by Ireland, which has agreed to discuss constructively tax issues but is implacably opposed to harmonising either corporate tax rates or agreeing a common consolidate base on which they are calculated.

The eurozone’s two largest economies presented their green paper to EU finance ministers in Brussels yesterday, setting out their plans to harmonise six areas relating to both tax base and rates gradually from 2013.

Harmonising tax systems is key to completing the single market, they argue, saying the different tax systems hinders growth, distorts competition, increases costs for business, and can lead to double taxation or double exemption.

But Austrian finance minister Maria Fekter said she believed it would lead in the end to increased taxes for companies. “This is to the benefit of high-tax countries. This is a missile.”

The Swedish minister Anders Borg said he wished to clarify that the object is to reduce corporation tax.

The Polish minister agreed and said while he was pleased that France and Germany were harmonising taxes to a degree, he did not favour the “consolidated” part of the plan to have a common consolidated corporate tax base, as it would not suit nett host countries with foreign direct investment.