Libertas.org - Common Consolidated Corporate Tax Base a Step Towards Unified Euro-zone Taxation

Home

Common Consolidated Corporate Tax Base a Step Towards Unified Euro-zone Taxation

Written by Dr. Constantin Gurdgiev
Wednesday, 31 October 2007
by Dr. Constantin Gurdgiev exclusively for Libertas.org The European Parliament in Strasbourg has voted in favour of introducing a Common Consolidated Corporate Tax Base in Europe (CCCTB). Members of the European Parliament in Strasbourg voted (324 votes in favour with 214 votes against) to support the Wagenknecht report, which deals with EU taxation policies. A large element of this report stated very clearly that the European Union should introduce a CCCTB in Europe. A common corporate tax base means introducing common rules for the administration and operation of corporation tax in Europe. I believe that that if harmonised rules are introduced for the operation of corporation tax in Europe, then we are only one step away from the introduction of a minimum (floor) level unified Euro-zone tax along the lines of the VAT regulations prohibiting any member state to have VAT rates below the EU-set floor levels. The CCCTB, if enacted, will introduce a set of strong incentives for companies to move their tax bases to the EU-wide level away from the national basis for legislation. The CCCTB will effectively discriminate against the member state-based companies (in areas such as labour taxation and outsourcing) in favour of the EU-registration status. This move signals that the EU is seriously preparing for the gradual introduction of the taxation regime that can dilute the Member States¹ veto powers over tax laws by effectively bypassing the need for the EU to seek Member States¹ consent all together. The vote also lays to rest any debate as to whether or not the EU is pursuing tax harmonization a charge long denied by the Commission. CCCTB is a logical first step on the road to introducing what the EU Commissioner for Taxation Laszlo Kovacs was advocating earlier this year a unified distribution system for Corporate taxation across the EU that will see revenue from the companies exporting from Ireland being allocated to the importing countries. Effectively, such a system would penalise fast growing small open economies like Ireland, Estonia, Czech, Slovenia and Denmark, rewarding stagnant giants of Germany, Spain, Italy and France. More ominously, the Big Four states want CCCTB to be introduced simultaneously with the fully harmonized corporate tax rate. Should the CCCTB be introduced, Irish corporate tax advantages will vanish overnight. The end result of this will be a precipitous fall in our corporate tax revenue and an erosion of tax incentives for the EU and non-EU companies to locate here. From an Irish perspective this is an issue that must be dealt with in a serious manner over the coming months. The only question is whether our Government is capable of standing up to the EU pressure. So far, there is no indication that it will. *Dr. Constantin Gurdgiev is a leading economist and journalist, and is a member of Libertas.*
Last Updated ( Wednesday, 19 December 2007 )