Earlier this year, it proposed a concept known as ‘home state taxation,’
which would allow small companies seeking to grow into other member states to
compute their tax according to the rules of the state which they come from.
A lovely idea, but one destined for the dustbin.
States would have to agree to it, signing all manner of agreements saying
companies could do as the EC proposed. Which member state is going to allow a
company to compute its profits according to someone else’s rules?
Only those, of course, who think they’ll raise more tax from it, which would
make it rather pointless for the ambitious SME trying to grow.
And vice versa, it’s difficult to see the UK, or anyone else, signing an
agreement with a low tax state.
The EU is going to pursue a pilot scheme, but I would be surprised if it
isn’t dropped, or forcibly turned down by member states.
The concept of a European tax base is likely to go the same way.
If the commission has any sense, it will stop stoking up rows with the member
states over such plans and let the ECJ do its tax harmonisation dirty work.
Alex Hawkes is Accountancy Age’s tax correspondent
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