Kovacs keeps faith in common tax-base plan

Taxation Commissioner László Kovács has confirmed that he will issue proposals on a common method for calculating corporate tax in September.

He expressed confidence that the initiative would receive strong backing from the French government, which takes the helm of the EU presidency in the second half of the year.

"I have some high expectations of the French presidency both on direct and indirect taxation," he said. France, Germany, Spain, Italy, Austria and the Benelux countries were, he said, "fully and actively" supportive.

Other member states, including Ireland, the UK and Slovakia, have expressed scepticism about the so-called common consolidated corporate tax base (CCCTB). The commissioner reiterated assurances that the tax base will not, as such countries fear, lead to the introduction of harmonised tax rates.

Should member states fail to agree unanimously on the matter, Kovács again indicated his readiness to use enhanced co-operation to introduce proposals. Under the Treaty of Amsterdam, agreed in 1997, member states may use enhanced co-operation to proceed in adopting laws in areas like taxation which would normally require unanimity. Business, he said, was strongly behind the proposals. A study conducted by audit firm KPMG last year showed that 80% of business respondents would favour the regime.

MEPs criticised the European Commission last year for relegating CCCTB in its programme for 2008 from the status of a strategic priority to work-in-progress, apparently in a bid to avoid any disruption to the ratification of the Treaty of Lisbon. French Socialist MEP Pervenche Berès, who chairs the European Parliament’s committee on economic and monetary affairs, is trying to rally cross-party support for the proposals to ensure that the Commission does not retreat. Berès said that the issue should be approached from a political, rather than a national, perspective.

On indirect taxation, the Commission this week (22 January) described plans to achieve progress on other controversial dossiers during 2008. Proposals aimed at harmonising rules on reduced value-added taxation (VAT) rates will be published in mid-2008. Kovács will offer flexibility to member states on rates applied to locally-provided and labour-intensive services, but will decline to include green products in the proposals as the UK and France would have wished.

On VAT fraud, a problem which costs member states €100 billion each year, the commissioner will propose ways of stepping up co-operation between taxation authorities. The communication, expected in March, will not satisfy member states such as Germany and Austria. Both countries want to introduce a mechanism known as reverse-charging, whereby tax is levied once at the point of consumption, to tackle the problem.

The Commission is currently discussing the prospects of introducing a pilot scheme for reverse-charging in Austria. Any experiment would have to last for at least five years. If an EU-wide reverse-charging scheme were to be introduced, however, member states would have to accept the establishment of a centralised authority to oversee returns.

Taxation Commissioner László Kovács has confirmed that he will issue proposals on a common method for calculating corporate tax in September.

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