TaxCorporate TaxEU corporation tax on the cards

EU corporation tax on the cards

A potentially groundbreaking initiative involving the setting up of a harmonised EU corporation tax is being prepared by the European Commission.

According to a report obtained by Accountancy Age, due to released shortly, the corporation tax would overcome the problems created by the existence of 15 different tax systems throughout the European Union.

The commission said differing tax national systems had caused losses in economic efficiency, generated compliance costs and contributed to a lack of transparency.

As the EU develops, ‘the pattern of international investment is likely to beincreasingly sensitive to cross-border differences in corporate tax rules,’the commission said.

Germany and France have the highest taxes with Ireland, Sweden, Finland andthe UK the lowest, according to the study.

It said a statutory EU tax rate ‘would have a significant impact by decreasing the dispersions -both between parent companies and subsidiaries – of marginal and average tax rates and this would go some way in reducing locational inefficiencies with the EU’.

‘The need to comply with a multiplicity of different rules entailsconsiderable compliance costs and represents in itself a significant barrierto cross-border economic activity which adversely affects thecompetitiveness of European companies,’ said the commission.

Although precise recommendations for action have still to be agreed, thepaper makes clear Brussels’ preference for a ‘comprehensive’ rather thana ‘targeted’ approach.

This could mean harmonised EU rules for determining a single tax base, a Europe-wide corporate income tax, or the ‘traditional solution’ of harmonised national rules. Provision, however, would be made for any country to opt out.

Last week EC taxation commissioner Frits Bolkestein said he was ‘astonishing that some eight years after establishing the internal market so many tax obstacles still exist for companies.’

Links

EC moves away from harmonisation

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