Proposals for a common Euro wide Corporation Tax rate

[Blindjustice]

rte.ie/business/2007/0502/tax.html

The EU Taxation Commissioner Laszlo Kovacs has published his latest proposals for creating a common tax base for corporation tax across the EU.

The EU body wants firms operating across borders to be able to file tax returns based on a single system to save the cost of complying with different national regimes. A common tax base would allow a company to offset losses in one member state against profits made in another

We have companies here employing hundreds dealing with VAT reclaims

[Blindjustice]

Ireland and Britain are opposed, fearing it will lead to harmonised corporate tax rates. Tax changes need the support of all 25 EU members, though a third or more states could introduce a common base in their own countries under the EU’s enhanced cooperation rules.

rte.ie/business/2006/0405/tax.html

[Blindjustice]

In the EU there are 27 different corporate tax bases, making it more costly for companies like multinationals to compile their tax returns. These costs would fall if, like the US, there was one tax base.

rte.ie/business/2007/0425/eutax.html

[Blindjustice]

Mr Ryan, who is a member of the economics committee in the European Parliament, said some countries, such as Germany, France and Italy, are demanding a mandatory system for a common consolidated corporate tax base be put in place.

’ I don’t believe in assurances that a common consolidated corporate tax base will only be optional . That is because those who support CCCTB want to introduce common corporate tax rates too’, he said

rte.ie/business/2007/0424/EU.html

[Blindjustice]

finance.gov.ie/viewdoc.asp?DocID=4543

Common Consolidated Corporate Tax Base

Ireland’s Position

* Ireland supports the Commissions efforts in transforming the European Union into the most competitive economic zone in the world but we do not believe that the introduction of a Common Consolidated Corporate Tax Base could advance the Lisbon Agenda nor that it could improve the competitiveness of the European Union. 

[The_Unwelcome_Guest]

Will never happen.

[whizzbang]

Will never happen.

why not? Do we have that much say in Europe?

[The_Unwelcome_Guest]

Will never happen.

why not? Do we have that much say in Europe?

It’s not just us.

They’re trying to bring the UK and the Swedes into the euro for example, this would only push them further away from the common market.

[ragingbear]

Will never happen.

It will happen - and almost certainly within 5 years.

You can’t have a long-term stable free trade area if any or all of the members can act as a corporate tax haven for economic activity which doesn’t actually happen in their territory. The only possible long term result of that is a race to the bottom on corporate tax rates, resulting in near zero rates everywhere.

All that has to happen for ‘end game’ is that germany (alone or with some other countries) accesses the subsidary companies which do operate within their country for corporation tax regardless of whether they declare the profit there (based on a percentage of their europe wide profits, the percentage determined some harder to scam measures of the economic activity) - this will kill the transfer pricing scam stone dead, and with it a big chunk of the corporate tax currently paid in ireland (not to mention the ‘rider’ employment used to provide a bit of plausible deniability).

The recent moves by both austria and switzerland to specifically target german companies for ‘headquarter relocations’ to enable them to pay less corporation taxes has just served to focus the german taxman’s mind a bit more.

And germany (and/or others) need absolutely no agreement from anyone else to bring in this ‘alternative minimum corporation tax’ - they can do it within their own national tax laws anytime. Now that it’s becoming a growing cause of tax leakage, it will be addressed - how and when are the only questions.

If they can do it in a way which offers other improvements, like a single ‘tax base’ they will. If not, they’ll close the loophole anyway, just to stop the rot.

[Blindjustice]

The European Commission aims to introduce draft legislation next year on the establishment of a common corporate tax base.

This would give companies doing business in several EU states the possiblilty of using a single method of calculating taxable income across their companies.

But states would retain the power to decide at what rate such income is taxed. The commission proposal also contains plans to apportion income liable for tax to the states where the economic activity takes place, rather than the state where the group is headquartered.

rte.ie/business/2007/0718/taxruling.html

[Blindjustice]

Sunday Business Post

A ruling by the European Court of Justice (ECJ) which underpins Ireland’s right to a lower corporation tax is a major obstacle to EU Commission proposals to harmonise corporate taxes, according to accountants.

A ruling on a Finnish company in recent days “reconfirmed the principle that domestic tax law should not prejudice a company’s ability to locate in a member state of its choosing”, according to the Institute of Chartered Accountants in Ireland (ICAI).

Brian Keegan, the body’s director of taxation, said ''in so doing, presented a major obstacle to the Common Consolidated Corporate Tax Base (CCCTB) proposals."

’ The case related to a Finnish tax clause which allows the transfer of money between group companies. It is unusual in that the company transferring the money gets a tax deduction and the money is then taxed at the company that receives it. The challenge arose when the Finnish company wanted this to apply to a subsidiary based in Britain.

While the firm lost its case, the court confirmed again the principles in the Cadbury Schweppes ruling. In this case, the ECJ ruled that countries such as Ireland, which offer lower tax rates to attract investment, are not in breach of EU laws.

In a note to members, Keegan said that the ruling presented “something of a dilemma to proponents of the CCCTB.The Finnish law at issue effectively allows the taxation of corporate groups on a consolidated basis. The ECJ has now confirmed that this cannot be done cross-border, unless member states are willing to surrender their powers of taxation,” he said.

He said a consolidated tax base could not be undertaken merely as a simplification or a harmonisation measure.

“It can only be adopted by those member states who can live without tax sovereignty.”

[ragingbear]

Brian Keegan, the body’s director of taxation, said ''in so doing, presented a major obstacle to the Common Consolidated Corporate Tax Base (CCCTB) proposals."

’ The case related to a Finnish tax clause which allows the transfer of money between group companies. It is unusual in that the company transferring the money gets a tax deduction and the money is then taxed at the company that receives it. The challenge arose when the Finnish company wanted this to apply to a subsidiary based in Britain.

Jaysus - comical Ali would be proud if you could call that a victory for ireland.

The company was trying to get a finnish corpo tax deduction by moving the profit out of the finnish subsidary, into the UK, and paying the lower UK rate of corpo tax on it. Which was prevented by a sensible finnish law, which allows tax deductions only if the money stays in finland (so they’ll get their slice of the money anyway).

Since ireland currently relies on exactly this money movement behaviour (foreign based ‘subsidaries’ moving most of their profits through an irish based ‘headquarters’), this case has left the door open for all the high tax countries to prevent the deduction of money to ireland from locally due tax - thus removing the incentive for moving the money through ireland at all. Expect to see the finnish law replicated across europe within a year or two.

On the CCCTB side, it’s rather obvious that the proposals involve giving up some tax sovereignty - fundamentally it’s about EU countries to agree how to share the tax pie from a company using a set of agreed rules, rather than having every country competing to take each others slice, but with the effect of letting companies keep nearly all.