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Survey Suggests Strong Company Support For EU Tax Harmonisation

by Ulrika Lomas, Tax-News.com, Brussels

25 September 2007


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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