Today (16 March) the European Commission unveiled the Common Consolidated Corporate Tax Base (CCCTB), a draft proposal which has been on the cards for years.
The plan comes at a time when Ireland's low corporate tax is at the heart of a row about getting countries to change their tax systems in exchange for bailouts.
The CCCTB was designed to make it easier for companies to run cross-border businesses. Profits made in a particular member state would be taxed according to the corporate tax rate of the country where the money was actually made.
The Commission insists that this is not about harmonising corporate tax rates, that the scheme will be voluntary and that it will reduce the administrative burden and boost cross-border ventures.
Newly-elected Irish Taoiseach Enda Kenny disagrees, as does the Irish Business and Employers' Confederation (IBEC).
Kenny has said he is opposed such moves as they introduce tax harmonisation by the back door. Kenny finds himself embroiled in a row with French President Nicolas Sarkozy, who asked Ireland to raise its low corporate tax, currently at 12.5%, to get a 1% discount on the interest rate it pays on its EU bailout.
At last week's EU summit, Kenny took on Sarkozy in a duel over tax when he pointed out that the French rate of 34% in practice translated into little more than 8% for most companies, because they can benefit from generous allowances and opt-outs.
Ireland's effective rate was actually 11%, not 12.5%, as the country had eliminated its allowances, the Taoisaech reportedly told Sarkozy.
Echoing the sentiments of Irish Taoiseach Enda Kenny, Irish MEP Marian Harkin described President Sarkozy's demands to lower the Irish corporation tax as a "lot of hot air", arguing that France's "effective" corporation tax was actually lower than Ireland's.
"Businesses would not support this if it was mandatory," Fergal O'Brien, IBEC's chief economist, told EurActiv.
The economist was drawing from a recent study by Ernst & Young which concluded that a CCCTB would increase the effective rate of corporation tax for most companies and that there would be a 13% increase in compliance costs for business.
O'Brien also heavily criticised the proposal for excluding companies' intangible assets, like intellectual property and brand value, from its calculations because Ireland's technology companies primarily profit from these and not from "bricks and mortar" assets.
"This tax model is based on the nineteenth century, not the twenty-first," O'Brien continued.
