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Ministers clash over tax levels

European Union ministers have reportedly clashed over proposals to harmonise the way in which companies calculate corporation tax in different countries.

EU countries’ finance and economic ministers staged a meeting to discuss setting a minimum rate for corporation tax.

Countries opposing such a move fear it could lead to the EU governing how much tax companies pay.

The European Commission said a survey of the compliance costs of EU firms concludes that companies should be allowed to use a single basis of assessment for corporate tax for all their EU-wide activities, a move it claims would avoid ‘the costly inefficiencies’ of dealing with 25 different company tax systems.

The survey was sent to 2,000 companies during September 2003, with replies coming in from 700 companies from 14 member states.

Taxation Commissioner Frits Bolkenstein says: "This European Tax Study demonstrates the potential costs that arise from the lack of co-ordination of EU taxation systems."

Before last week’s meeting, Bolkenstein says: "I hope ministers will have regard to these results in their discussions on reducing the administrative burden and on company taxation during the informal meeting of member states’ economic and finance ministers."

France and Germany have led calls for rules to cover company taxation, complaining that some of the new EU member states in Eastern Europe are able to persuade companies to relocate there because of lower rates.

The French finance minister Nicolas Sarkozy proposed that such countries be ineligible for structural funds, but this view was not widely supported.

The UK and Ireland are among the countries opposing any changes to domestic taxation. A working group has now been formed to investigate the harmonisation of corporate tax bases. Any changes to the tax law would need to be agreed unanimously.

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