EC Prepares To Bypass Objections Over Tax Harmonisation

by Ulrika Lomas, for LawAndTax-News.com, Brussels

21 July 2004

According to documents seen by Reuters this week, the European Commission may be planning to allow a small group of EU member states to go ahead with tax harmonisation proposals put forward by France and Germany, in a process known as "enhanced cooperation", which has never before been used.

France and Germany have, since the accession of ten new lower-taxing members to the Union, been calling for the setting of a minimum corporate tax rate in order to ensure that business is not poached away from the existing EU nations by their newer, cheaper counterparts.

However, countries such as the United Kingdom and Ireland have traditionally been staunchly opposed to any moves towards harmonisation, which means that an EU-wide adoption of the Franco-German proposal is highly unlikely.

In order to bypass these objections, the EC is reported to be examining the implications of implementing a scheme for tax-base harmonisation in a smaller 'core' group of member states.

"The Commission will examine the possibility for an appropriate legislative initiative addressed to all member states or, if this cannot be attained within a reasonable period of time...the possibility for an enhanced cooperation for the introduction of the common corporate tax base," Reuters quoted the Commission paper, which has been sent to national governments, as announcing.

European finance ministers will discuss the proposal at a meeting to be held in the Netherlands in September, the news service went on to reveal.

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