MEPs vote on tax harmonisation

A single method of computing company tax should be applied throughout the EU, and be compulsory for large companies, the European Parliament’s economic affairs committee has agreed.

MEPs were divided on the issue up to now but voted 37 to seven that the tax apply to all European cross-border companies when introduced.

After five years, the tax would apply to all with the exception of SMEs that could opt in if they wished.

A decision on the common consolidated corporate tax base, proposed by the European Commission, is a matter for the member states to decide and the European Parliament’s only role is to express an opinion.

However, their opinion adds to the pressure on Ireland and other member states that do not favour the common consolidated corporate tax base.

While it would need a unanimous decision by member states to introduce, France and Germany say they will proceed with it and hope other countries will join them.

Fine Gael MEP Gay Mitchell, a member of the economic affairs committee, said: “You could not rule out some form of enhanced cooperation in time, but I could not see Ireland, the UK and others signing up for this.”

He pointed out that the original report on competition, carried out by Mario Monti before he became Italian prime minister, concluded that tax competition was a good thing and that would exclude harmonising tax across the EU.

The lead MEP on the matter, Marianne Thysssen, a Belgian member of the European People’s Party, expressed the views of the majority in favouring a common consolidated corporate tax base.

“This harmonised system for calculating the tax base makes it possible for companies to consolidate the results of their individual branches, which allows them to compensate for any losses a group member might have.

“This makes it easier for companies to have and keep branches in different member states and it reduces red tape,” she said.

Under the proposal, a firm could choose whether to use the consolidated corporate tax base or the national system to calculate its liability. Cross-border firms would pay tax to the different countries according to where their turnover, labour and assets were based.