The European Commission has proposed a a common system for calculating the tax base of businesses operating in the EU which could have serious implications for multinational firms in Ireland.

Under the proposed common consolidated corporate tax base, or CCCTB, businesses would be given the option to use a single regime instead of the European Union's 27 different corporate tax systems.

Under CCCTB, the tax bills of companies who have offices around Europe would be calculated centrally. Their taxable profits would be carved up between the member states they operate in according to the size of their business in those countries, which would retain the right to set their own rate of tax. This should, in theory, reduce administrative costs.

Taoiseach Enda Kenny said last week he opposed plans to establish a CCCTB as it could introduce tax harmonisation by the "back door".

While not necessarily harmonising the tax rate, a CCCTB would certainly make it more difficult for international companies to allocate revenues into Ireland’s low-tax jurisdiction.

EU taxation commissioner Algirdas Šemeta said Irish criticism of the scheme was based on false assumptions about it. "I don't understand why some are so worried about it," said Mr Semeta. "It's not about harmonising corporate tax rates. It's not even a first step in this direction."

According to the European Commission the primary benefits of establishing a common consolidated corproate tax base would be to "reduce the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face in having to comply with up to 27 different national systems for determining their taxable profits.

The commission argues that a CCCTB would mean that companies could benefit from a "one-stop-shop" system for filing their tax returns and would be able to consolidate all the profits and losses they incur across the EU.

It estimates the CCCTB would save businesses across the union some €700 million in reduced compliance costs, and €1.3 billion through consolidation each year. In addition, businesses looking to expand cross-border will benefit from up to €1 billion in savings. The commission also says the CCCTB will also make the EU a much more attractive market for foreign investors.

Under the proposals outlined today, member states would maintain their full sovereign right to set their own corporate tax rate.

"The CCCTB will make it easier, cheaper and more convenient to do business in the EU. It will also open doors for SMEs looking to grow beyond their domestic market. Today's proposal is good for business and good for the EU's global competitiveness," said Mr Šemeta.

A detailed assessment of the commission's proposals published recently by Ernst and Young found that CCCTB would likely result in a 13 per cent increase in compliance costs for businesses.

In a statement issued this afternoon, the Department of Finance said it remains "sceptical" about many aspects of the CCCTB. "But we will work constructively with the commission and other member states on the issue."

Ibec, which commissioned the Ernst and Young report along with a number of other bodies, said it believed the proposals were unlikely to make Europe a more attractive as an investment location.

"CCCTB is unlikely to reduce the cost of doing business in the EU. Instead of making Europe's corporate tax systems simpler it will add a further layer of complexity," said director-general Danny McCoy. "The proposals represent an excessive and unnecessary change to how corporate income tax is assessed and present a range of uncertainties for European business."

The Irish Taxation Institute was also critical of the proposals for a common tax base.

"It is important that the EU understands and appreciates the potential compliance costs and the impact on the corporate tax burden resulting from this proposed major change," said president Andrew Cullen. "The EU is competing for investment in an international environment where certainty, return on investment and compliance costs are critical to multinational investment decisions."

The American Chamber of Commerce Ireland said while the proposals need to be examined thoroughly, it agreed with the Taoiseach's assessment that a common consolidated tax base is tax harmonisation by 'the back door'.

"CCCTB proposals may have had some merit 10 years ago when they were first tabled. But the world has moved on significantly since then. Ultimately, this is a gamble by the EU which could prove every expensive and costly impacting on jobs, investment and economic growth across the European Union," the organisation said.