In a statement likely to concern the governments of Britain and Ireland, Europe’s Taxation Commissioner Frits Bolkestein, has called upon a handful of member states to press ahead with the harmonisation of their tax bases in order to improve fiscal transparency across the European Union.
As London and Dublin continue to take a firm stance against any idea that smacks of ceding tax raising powers to Brussels, Bolkestein told the French daily Le Monde last week: "With the path being blocked, there needs to be an 'enhanced cooperation' to harmonise the corporate tax base in some (countries)." This would then allow a kernel of member states to pursue policies of closer tax integration, he commented.
Such a measure would allow for easier comparison of company performance throughout the EU, argues Bolkestein, adding that it is also a logical step given that Europe’s listed firms will be obliged to adopt standardised accounting norms from 2005.
Although there are likely to be wide differentials in tax rates in the early stages of harmonisation, the Taxation Commissioner believes that increased fiscal competition and transparency would eventually lead to rates falling roughly into line with one another.
It was suggested by Bolkestein that the ten accession states may want to keep their corporate tax rates low in the initial stages of harmonisation in a bid to attract higher levels of foreign investment. However, he rejected the notion that business will up sticks from Western Europe and migrate east as a result, observing that many other factors such as language and labour market conditions play an important role in a firm’s investment decisions. "Businesses won't all go to Estonia or Cyprus," he assured.
The Commissioner stated that he will advance his proposals “as quickly as possible” and before the end of the Commission’s mandate in October, if his idea is well received by member states.
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