BRUSSELS, March 16: Europe launches radical plans on Wednesday for a single company tax regime in a market of half a billion consumers as bailed-out Ireland battles to keep its low rate advantage to spur growth.
The re-emergence of the proposal comes after sparks flew at a eurozone summit on Friday, when new Irish Premier Enda Kenny clashed with French President Nicolas Sarkozy on the issue.
The latter, backed by Germany and the Netherlands, refused to lower the interest rate on Ireland's 67.5 billion euro ($94 billion) international bailout without concessions from Dublin on the tax question.
European Union taxation commissioner Algirdas Semeta wants the 27-state bloc's 20 million companies to be able to use a single tax regime to calculate taxable profits instead of having to deal with different national systems.
The goal of the Common Consolidated Corporate Tax Base (CCCTB), he says, is to cut administrative costs and double taxation problems faced by companies operating in more than one EU country by allowing them to use one system.
France and Germany support the plans but Ireland dismisses the idea as a first step towards harmonising tax rates across the bloc.
Ireland's 12.5-per cent corporation tax rate helped to fuel growth in what was once known as the Celtic Tiger and Dublin argues that it is not up for discussion because it attracts foreign investment and job-creating industry that generates exports -- the very growth it needs for its economy to recover.
EU rivals accuse Ireland of gaining an unfair advantage with the low rate -- on the other and also argue that Dublin is losing out on the very revenue streams that could ease its debt and deficit problems.
Kenny told the Dublin parliament on Tuesday that he would resist EU pressure sure to re-surface at a summit next week of the 27 states dedicated to signing off on the bloc's response to its sovereign debt crisis.
“I can reassure the House that I will not compromise on our 12.5 per cent corporation tax,” Kenny said.
“This is a core element of our fiscal strategy.” German Finance Minister Wolfgang Schaeuble and EU Economic Affairs chief Olli Rehn both urged Ireland on Tuesday to be realistic and drop its opposition to raising the business tax rate.
Rehn said Dublin should take a “constructive” approach while Schaeuble said US Treasury Secretary Timothy Geithner had told him of frustration in Washington at the volume of American business activity that takes advantage of the Irish tax regime.Figures from PricewaterhouseCoopers in London in its 2011 Paying Tax survey show the extent of the problem.
Produced in conjunction with the World Bank, the report puts actual tax paid by companies in Ireland at 26.5 per cent, with the tax on profit at 11.9 per cent. The total rate includes labour, property and other lesser or hidden taxes.
In France, companies would pay 65.8 per cent, according to report co-author Susan Symons. Corporate tax itself accounts for just 8.2 per cent, less than the Irish statutory rate, but taxes on labour are responsible for a whopping 51.7 per cent.
The total tax rate for the United States comes in at 46.8 per cent.
“The statutory rate is just the starting point,” Symons told AFP. “The tax base has to be adjusted for local conditions and deductions taken into account.
That's what the EU is trying to harmonise.” —AFP