Incoming EU Tax Chief Supports Company Tax Base Harmonisation

by Ulrika Lomas, Tax-News.com, Brussels

17 November 2004

The European Union’s Tax Commissioner-in-waiting, Laszlo Kovacs, revealed yesterday that he is in favour of harmonising the corporate tax base across the union, although rejecting a proposal supported by the French and Germans for more centralised setting of tax rates.

Speaking at his confirmation hearing in the European Parliament, Kovacs stated that the creation of a uniform system for the calculation of corporate tax “would eliminate the current cross-border company tax problems such as double taxation.”

However, the former Hungarian foreign minister stopped short of advocating the placing of more control over tax rates in the hands of the Commission, arguing that “fiscal competition is not damaging as such.”

“I support a degree of tax competition between member states. I do not see a need for community action on corporate tax rates,” he commented, referring to complaints from France and Germany that large corporate tax cuts in the new member states of Eastern Europe amounts to unfair tax competition.

Responding to Franco-German fears that the widening east-west tax gulf will lead to falling levels of investment, Kovacs argued that the corporate tax rate is not the overriding factor in the a company’s decision to invest abroad.

“Movements (by companies) are not generated by tax levels,” he told parliament.

“Taxation is only one of the determinants of investment decisions,” he added.

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