Dr Charles Tannock

Member of the European Parliament for London

Commission hopes to launch co-operation on company tax

Agence Europe - 2 September 2004

Brussels, 01/09/2004 (Agence Europe) - The European Commission hopes to get a signal from the Member States to start preparations for reinforced co-operation on company tax at the informal Ecofin Council, on 11 September in Scheveningen (The Hague), confirmed the Director General for taxation, Robert Verrue, before the European Parliament's economic and monetary committee.

The presidency has not formally included this subject on the programme for the Ecofin meeting, but it is to be dealt with at the lunch between ministers on the Saturday, on the basis of the working document presented in July by the Commission (see EUROPE of 8 July, p.13). In this document, the European Commission proposed to set up working groups to prepare the harmonisation of the tax base for companies, and smaller groups for the Member States wishing to take it further. "I do not believe that there can be agreement between all the Member States on the tax base, and so we propose to use this method of reinforced co-operation provided for by the Constitution", commented Robert Verrue. "If its welcome in Scheveningen is somewhat more than polite, we will be able to start work on the substance", he said. "This is a job which is likely to take two to three years", he said.

The work will start with the main questions put to the ministers at the informal Council: 1) should the tax base be calculated on the consolidated turnover? "Is the Commission in favour?"; 2) Should it be obligatory? "Does the Commission take the view that it should be optional initially and then compulsory?"; 3) Should it apply to all businesses? According to the Commission, only businesses which are quoted on the stock exchange or which exceed the threshold of capital set for the application of international accounting standards (IAS) should be affected.

"Current affairs show that the debate on tax rates cannot be avoided", said Robert Verrue, referring to the French and German positions in favour of harmonisation and against "tax dumping" of the new Member States. However, the Commission would prefer to concentrate on the issue of the tax base of taxation transparency for businesses, because it feels that there is no dumping as such. "The downward trend of nominal taxes has not been accompanied by a drop in tax revenue, because the fall in taxes has gone hand in hand with an extension of the tax base", he noted.

During the debate, British Conservatives Theresa Villiers and Charles Tannock, supported by Luxembourg Christian Democrat Astrid Lulling, defended tax competition and the right of governments to provide their businesses with advantages, which was refuted by Portuguese Socialist Elisa Feirrera, who stressed the harm that tax competition can do. Ms Villiers referred to the risks weighing upon the democratic system if tax legislation is determined increasingly by the jurisprudence of the Court of Justice, to the detriment of the autonomy of the Member States. "The percentage of cases brought before the Court [on company taxation] has increased exponentially in recent years, notably from Member States where legal services within companies are powerful", Robert Verrue. He feels that as the contradiction between the law and its interpretation is on the increase, the law should be changed.