Kovacs Remains Firm On Harmonisation Of EU Company Tax Base

by Ulrika Lomas, Tax-News.com, Brussels

25 November 2005

European Commissioner for Taxation, Laszlo Kovacs has stated that plans to create a common corporate tax base across the European Union will be completed by the end of this year, according to the Financial Times.

Stating that business is "firmly supportive" of the plans, Mr Kovacs expressed the belief that if companies were allowed to apply a single EU-wide set of rules for company tax purposes, this would eliminate most of the problems such as double taxation they currently face when they do business across borders, and lead to a substantial reduction in compliance costs.

Mr Kovacs is also of the belief that a harmonised company tax base will increase tax competition across the EU because it will make the true extent of a member state's tax burden more transparent.

Despite opposition from the UK, Ireland, the Czech Republic, Estonia and Slovakia to any move towards corporate tax harmonisation, Mr Kovacs has stated that he is prepared to leave them outside the scheme, and move forward under the auspices of an 'enhanced cooperation' initiative.

Mr Kovacs also faces hostility towards tax harmonisation from within the European Commission itself. In a Brussels speech earlier in the month, Internal Market Commissioner Charlie McCreevy, stated that he is "emphatically opposed to tax harmonisation - be it by the front door or the back".

McCreevy also dismissed the chances of attaining an agreement on what constitutes a common corporate tax base as an unobtainable pipe dream, observing that: "Assuming we can agree on [this] during our lifetime, we will probably then have completed one third of the journey. The harder bit comes next."

However, while Mr Kovacs has acknowledged the scale of the task ahead of him, he remains confident that all of the work towards a common corporate tax base will be completed by 2009, when his term of office ends.

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