An EU-wide tax base “could make a significant contribution to the success of the internal market”
EU tax commissioner to propose single EU company tax base
Wednesday 2 May 2007
EUobserver reports that EU tax commissioner Laszlo Kovacs is to propose the introduction of a single EU company tax base, a proposal that is expected to cause a clash within the college of 27 commissioners as well as with EU member states. According to Mr. Kovacs’ report, an EU-wide tax base “could make a significant contribution to the success of the internal market”, because companies operating across the 27 bloc would see their administrative burden reduced while cross-border activities and foreign investment would be boosted.
The tax base should be broad with a low tax rate because it is “the most economically efficient”, while “specific reliefs and incentives should be limited in number and properly targeted and justified”, Kovacs says. The common rule should apply to both to large multinational companies as well as to small and medium size enterprises although some more thought should be given to SMEs due to the possibility of high compliance costs.
Mr. Kovacs’ report leads to many questions: How will the SMEs based in the new member states afford such a uniform tax? Would a harmonised tax lead to the creation of a single tax authority? Will the financial sector be included in the scheme?
Before he finds an answer to these questions, Mr. Kovacs will face fierce opposition by some of his commissioners colleagues, EU internal market commissioner Charlie McCreevy (Ireland) and EU budget commissioner Dalia Grybauskaite (Lithuania) being the most vocal sceptics. Reluctance is also expected to be shown by the UK, Ireland and several new member states who use tax breaks to win foreign investments and fear that the introduction of a single EU company tax base could lead to a common minimum tax rate.
However, Mr. Kovacs has declared that he would be ready to work with a pioneer group of member states using the enhanced cooperation mechanism - allowing for eight states to push forward with initiatives that are opposed by the others – hoping that the rest will join later.
Source: EUobserver