Taxation Commissioner László Kovács has presented plans to co-ordinate national tax systems in order to cut the cost to business of complying with different tax systems and avoiding tax abuse.
The Communication, adopted by the Commission on 19 December 2006, aims to eliminate discrimination and double taxation of companies, in the hope that this will encourage cross-border activities and investments while helping to prevent tax evasion and abuse.
The proposal represents a first step towards Commissioner Kovács’ preferred solution to problems faced by businesses and citizens operating under different tax jurisdictions: the creation of a common consolidated corporate tax base (CCCTB).
Kovács says that he will likely propose legislation on a CCCTB in early 2008, adding that the single tax base will not prevent countries from setting their own tax rates.
The proposal would require unanimous support to pass and could be frustrated by countries such as Ireland and the UK, which are reluctant to let the Commission encroach on their national sovereignty.
It is also likely to be resisted by low-tax member states, which fear that the creation of a common tax base will be a first move towards setting an EU-wide minimum tax rate.
Germany, which supports Kovács’ plans for a CCCTB, is likely to push for progress on the project once it takes over the EU Presidency on 1 January 2007.