France and Germany to 'harmonise' corporate tax rates
Germany and France moved even closer to full fiscal union by announcing they will be "harmonising" their corporate tax rates by 2013 - a move that will increase the prospect of an EU-wide enforced tax rate that Ireland and the UK have been heavily opposed to.
French President Nicolas Sarkozy (L) bids farewell to German Chancellor Angela Merkel (R) after an European mini-summit on the debt crisis on November 24, 2011 in Strasbourg, eastern France.
The tax reforms join France and Germany, ahead of similar proposals from the European Commission Photo: AFP
Helia Ebrahimi
By Helia Ebrahimi
6:17PM GMT 21 Feb 2012
Comments194 Comments
The proposals are "a first step towards more European coherence" and support the recent Euro Plus Pact treaty, which sets out rules for economic and fiscal co-ordination - which the UK, Sweden, Czech Republic and Hungary did not sign up to.
The tax reforms join France and Germany, ahead of similar proposals from the European Commission for a single "aligned" business tax rate known as the Common Consolidated Corporate Tax Base (CCCTB) for all of Europe.
But last year the EC struggled to gain consensus across all 27 EU member states. Britain has been hostile to the Commission's plans for both an energy tax directive and the CCCTB because both are seen as eroding national sovereignty, opening the door to the EU setting taxation rates.
The CCCTB is also seen as hugely damaging for countries such as Ireland, which has an ultra-low business tax rate of 12.5pc. Last year, Ireland, along with Bulgaria, Malta, the Netherlands, Poland, Romania, Sweden and the UK, all worked to fight off the tax harmonisation drive - which would force them to raise their own low tax rates.
Richard Asquith, head of tax at TMF Group, said: "The reluctance of many low-tax countries to back a unified tax system for Europe has been enough to push Germany and France into moving ahead alone. While the UK was always going to be the usual vociferous opponent, this will set up a potentially dangerous fission between Ireland and the core EU countries. With the ongoing risks around Ireland's debt position within the current euro crisis, this will build the pressure."
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Some commentators have accused Germany of using the CCCTB to eliminate low-tax competition in the EU after being forced to pay for Ireland's 2011 €85bn bailout.
Tuesday's announcement at ECOFIN, the committee of European finance ministers, by François Baroin and Wolfgang Schäuble, identified five priority areas: group schemes, tax treatment of dividends and of interest charges, transferring tax deficits, repayment rules and the partnership scheme.
The plans will also hit the Big Four accountancy firms, which provide tax advice for companies doing business under the different regimes.
Germany and France moved even closer to full fiscal union by announcing they will be "harmonising" their corporate tax rates by 2013 - a move that will increase the prospect of an EU-wide enforced tax rate that Ireland and the UK have been heavily opposed to.
French President Nicolas Sarkozy (L) bids farewell to German Chancellor Angela Merkel (R) after an European mini-summit on the debt crisis on November 24, 2011 in Strasbourg, eastern France.
The tax reforms join France and Germany, ahead of similar proposals from the European Commission Photo: AFP
Helia Ebrahimi
By Helia Ebrahimi
6:17PM GMT 21 Feb 2012
Comments194 Comments
The proposals are "a first step towards more European coherence" and support the recent Euro Plus Pact treaty, which sets out rules for economic and fiscal co-ordination - which the UK, Sweden, Czech Republic and Hungary did not sign up to.
The tax reforms join France and Germany, ahead of similar proposals from the European Commission for a single "aligned" business tax rate known as the Common Consolidated Corporate Tax Base (CCCTB) for all of Europe.
But last year the EC struggled to gain consensus across all 27 EU member states. Britain has been hostile to the Commission's plans for both an energy tax directive and the CCCTB because both are seen as eroding national sovereignty, opening the door to the EU setting taxation rates.
The CCCTB is also seen as hugely damaging for countries such as Ireland, which has an ultra-low business tax rate of 12.5pc. Last year, Ireland, along with Bulgaria, Malta, the Netherlands, Poland, Romania, Sweden and the UK, all worked to fight off the tax harmonisation drive - which would force them to raise their own low tax rates.
Richard Asquith, head of tax at TMF Group, said: "The reluctance of many low-tax countries to back a unified tax system for Europe has been enough to push Germany and France into moving ahead alone. While the UK was always going to be the usual vociferous opponent, this will set up a potentially dangerous fission between Ireland and the core EU countries. With the ongoing risks around Ireland's debt position within the current euro crisis, this will build the pressure."
Related Articles
Some commentators have accused Germany of using the CCCTB to eliminate low-tax competition in the EU after being forced to pay for Ireland's 2011 €85bn bailout.
Tuesday's announcement at ECOFIN, the committee of European finance ministers, by François Baroin and Wolfgang Schäuble, identified five priority areas: group schemes, tax treatment of dividends and of interest charges, transferring tax deficits, repayment rules and the partnership scheme.
The plans will also hit the Big Four accountancy firms, which provide tax advice for companies doing business under the different regimes.