A new survey conducted by KPMG International has suggested that there is strong
support within the tax departments of European companies for both a consolidated
corporate tax base (CCCTB) and the harmonisation of European Union corporate
tax rates.
KPMG asked finance directors, tax directors and tax managers from over 400
companies, including some of the largest companies from all 27 EU countries
and Switzerland, for their views on the European Commission's CCCTB plans, which
propose that the profits of businesses operating in more than one EU member
state should be calculated according to a single EU-wide formula, rather than
the 27 different formulae used today. Profits would then be reallocated to the
countries in which the businesses are active, to be taxed at those countries’
tax rates.
According to KPMG, the idea was supported by 78% of respondents across Europe.
Tax professionals in the Czech Republic, Denmark and Spain were 100% in favour,
along with 96% in Italy, 90% in Greece, Luxembourg, Poland, Romania, Slovenia
and Sweden, 84% in Germany and 80% in Austria, Finland, Hungary and Portugal.
Among the large economies, the UK, was most sceptical, with 62% in favour and
32% against. Only Ireland and Slovakia registered majorities against the proposal,
with 50% opposed in each country.
While the Commission has stressed that it is not proposing a single European
corporate tax rate, 69% of respondents to KPMG's survey said that, in addition
to the common corporate tax base, they would like to see a single rate for the
whole of Europe.
Only the UK, Cyprus, Ireland, Poland and Switzerland recorded majorities against
a single rate. Denmark was evenly split for and against, but in all other countries
there was strong support for the idea.
KPMG said that businesses were attracted by the prospect of more straightforward
tax compliance and better business planning. While 22% thought the new system
could increase the amount of tax their business pays, this was balanced by 21%
who thought their tax bills would fall, and 42% who thought it would make little
difference.
Speaking at KPMG’s Tax Summit in Lisbon, Portugal, where delegates from
around 300 KPMG member firms’ clients gathered to discuss European
tax issues, Sue Bonney, Head of Tax for KPMG in Europe, the Middle East and
Africa announced that: “We were surprised by the strength of opinion in favour of
the CCCTB proposals. Even though the scheme has not yet been made public, 34
percent of respondents said that their companies would definitely choose to
use it, with 48 percent reserving judgment until they see the detail.”
The CCCTB proposals are due to be made public in 2008, and the Commission hopes
that they will be in place by 2010. Many respondents thought that this timetable
was optimistic, but 66% expected the system to be in place by 2015, and 85% by
2020. Only 15% said that it would never happen.
“Taken together with the support for a single European corporate tax
rate, this is a very clear vote from business in favour of a simpler, clearer
tax system, even if it requires companies to give up the benefits of choosing
between the tax regimes of different countries,” continued Ms Bonney.
“Business is sending a message to policymakers that they are prepared
to trade choice for certainty, provided this does not result in higher tax rates
and more compliance costs.”
She added that there are signs that the focus of tax competition is moving
from the European to the global stage. “Eighty six percent of respondents
indicated they trade outside the EU, and of these 42 percent said that a common
EU tax base would make them more competitive in global markets,” she stated.
“Our annual Corporate and Indirect Tax Rate survey shows that European
corporate tax rates are among the lowest in the world. The message from business
seems to be that if EU member states are able to consolidate their low rates
and simplify the compliance system, they have an opportunity to win a potentially
lasting global competitive advantage for European companies," she concluded.
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