In his speech at the plenary session of the Economic and Social Committee in Brussels and a week after addressing a conference on the same subject in Sweden, the Hungarian Commissioner Laszlo Kovαcs claimed that a plan for more harmonisation of corporate taxation could be ready in three years: 'It is evident that if we are serious about delivering growth and jobs in the EU, we must tackle elements of tax systems that inhibit individuals and companies from reaping the benefit of the enlarged Internal Market'.
The European Commission has recently proposed strategic objectives -prosperity, solidarity and security - for the European Union for the next five years. A new direction for the so called 'Lisbon Agenda' was proposed, refocusing efforts on action to deliver growth and jobs, but also to strengthen the EU's position in the world economy.
Although Commissioner Kovαcs speech took place before the French and Dutch referendums on the EU Constitution, he stipulated that working on economical targets only can be acceptable while 'maintaining the unique European social model and the overall approach to sustainable development'. Did he foresee the huge concerns in this area of many French and Dutch which lead to the massive No votes in this countries?
The European Commission is now working on details to create a uniform system for calculating a corporate tax base, ending wide national variations. 'We must reduce, if not eliminate, the red tape, excessive compliance costs, administrative burdens and double taxation that business encounter when they have to deal with the tax administration of more than one Member State'.
The tax Commissioner indicated, that the task of distilling a common method for calculating corporation tax base is large. At the moment there are 25 different ways for it in Europe. 'But if we can manage to have only one EU-wide set of rules that will increase competitiveness'.
'I would like to stress that a common company tax base in the EU would not mean a common corporate tax rate', said Mr. Kovαcs. 'I believe that tax competition is not bad by definition. I support a degree of tax competition between Member States to the extent that it forces governments to produce value for money. But at the same time we must continue our efforts to eliminate harmful tax competition which undermines fair competition, erodes tax revenues and deters Member States from making efforts to eliminate tax obstacles.' A policy for harmonisation of corporate tax rates is strongly advocated by France and Germany as a means for ending 'tax dumping' by member states with very low corporate taxes.
The Commission has now established as one of its priorities in the tax field the creation of a common consolidated corporate taxation base in the EU. 'We consider that if companies were allowed to apply a single EU-wide set of rules for company tax purposes, this would eliminate most of the current problems such as double taxation that they currently face when they do business across borders in the EU. It would also lead to a substantial reduction in compliance costs.'
He said he believed there would be wide support. When asked when the plan for harmonisation of corporate taxation could be ready, Commissioner Kovαcs answered: 'my assessment is three years if everything goes well'. He expected that 20 member states out of 25 supported the idea, adding that he thought others would come around once the advantages to business became clear.
One reaction on Mr. Kovαcs was already quite clear. Gordon Brown, Britain's Chancellor of The Exchequer, told the Financial Times, that he believes the move of the European Commissioner would interfere with national sovereignty and restrict flexibility in the tax field.
