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28th Aug 2016

France to push for EU company tax

  • Brussels argues a common EU tax base would make life easier for companies doing cross-border business (Photo: European Community)

France is planning to push forward plans for a common EU company tax base during its six-month term at the bloc's chair, starting in July.

"It has been going on for a long time but this is one issue that we are determined to push," French economy minister Christine Lagarde told reporters on Monday (7 April), following a tax forum organised by the European Commission.

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The corporate tax base idea has been advocated by EU tax commissioner Laszlo Kovacs as a way to simplify cross-border business and cut red tape for European companies by setting up a single system for calculating taxes across the 27 member states.

But it has been so far strongly opposed by a bunch of countries, mainly the UK, Ireland, Estonia, Lithuania and Slovakia. They fear such a common tax base would be the first step towards harmonisation of tax rates, an area defended by EU states on national sovereignty grounds.

But both Paris and the EU executive deny this assumption. "Whether you have 12 percent in Ireland, or 33 percent in France, or 15 percent in Germany is irrelevant," argued Ms Lagarde.

"What matters is what is the ultimate taxation paid by companies. That depends on two things, the tax rate and the basis. Agreeing on the basis would be extremely positive. So we will push for that," she added.

The commission has set up a special working group which includes national experts to work on calculations of a base which would be acceptable by all countries. Brussels is also awaiting results of an impact assessment study before it tables concrete legislation.

Tax-related issues need to be agreed by unanimity but Mr Kovacs argues the corporate tax base could be kicked off and function even without the group of states which are opposed to the model.

Still, some commission officials suggest presentation of the plan by Brussels has been delayed until the second part of the year due to fears it could negatively influence the referendum on the EU's new Lisbon treaty in Ireland, scheduled for 12 June.

Doubts over green taxes

Meanwhile, the incoming French presidency is still also hoping to make headway with its joint initiative with Britain on the introduction of reduced VAT rates for energy efficient products, such as light bulbs or refrigerators.

While EU leaders asked the commission to look into the matter at their March summit, several states expressed objections to the idea, with the commission also doubtful about its chances to push it through.

"While in principle everybody would agree, then you run into the issue of what is green and what is not green," Ms Lagarde admitted, adding: "What is a green product today and what is a green product tomorrow?"

Apart from such technical complications, Mr Kovacs said some countries favour other types of instruments for supporting energy-saving products.

"I think the essence of the French-British proposal is to promote environmentally friendly and energy saving materials, products and appliances. We do agree with that. What is technically the best solution is another question," the commissioner said.

Also speaking at the tax forum, EU industry commissioner Gunter Verheugen announced he would introduce some basic rules and criteria for all products to prove they are energy-efficient and become eligible for tax incentives.

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