4th Jul 2022

France and Germany to launch EU company tax scheme

France and Germany will soon propose that company tax rates in the EU be harmonised more closely, according to media reports.

Officials in Berlin are said to be working on plans to establish maximum and minimum bands for corporate tax within the EU. The proposals are set to be tabled officially at a forthcoming meeting of ministers from Paris and Berlin.

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  • 'Old Europe' is concerned that investment will drift east if the current tax sytem stays in place (Photo: European Commission)

The move follows expressions of concern from both capitals about the low levels of corporate tax in some of the ten new member states.

Businesses are charged a basic corporate tax rate of 39 percent in Germany, compared to 15 percent in Latvia and Lithuania and 19 percent in Poland and Slovakia, according to the FT.

And leaders in Germany and France are worried that investment will drift towards these new countries if some form of harmonisation does not take place.

There have even been strong hints that German contributions to the common EU budget - which will essentially go to the new member states - could be called into question if these states do not increase their rate of corporate tax.

But the Franco-German proposals are unlikely to be met with universal acclaim.

The European Commission, for its part, is in favour of tax competition while new member states are unlikely to give their nod of approval to such proposals. Changes to EU tax policy must be agreed unanimously.

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