MEPs back plan for common consolidated corporate tax base

MEPs MEETING in Strasbourg have backed a plan to introduce a compulsory pan-EU business tax system, a move that will likely be greeted with concern in Ireland.

The introduction of a common consolidated corporate tax base (CCCTB) would allow companies to submit one centralised tax return across all EU countries in which they operate. Their taxable profits would then be split 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.

Supporters of the plan claim it would reduce costs and administrative burdens for businesses operating across a number of countries.

However, the initiative has been dismissed previously by Taoiseach Enda Kenny as tax harmonisation by the “back door” amid concerns that it would make it more difficult for multinationals to take advantage of Ireland’s low 12.5 per cent corporation tax.

In the original legislative proposal put before parliament, the European Commission suggested the introduction of a CCCTB on a voluntary basis. Under the revised plan, the system will be made mandatory throughout the EU after a five-year period for all companies except small and medium-sized enterprises, which could opt in if they so wished.

The pan-European tax plan was adopted yesterday with 452 votes in favour, 172 against and 36 abstentions.

France and Germany have both been pushing to speed up talks on legislation to establish a common tax base, claiming that it is essential to promote economic growth in the union.

The Government came under sustained pressure from both Paris and Berlin at the beginning of the year to dilute the Irish corporate tax regime in return for an interest rate cut on Ireland’s EU-International Monetary Fund bailout.

The Taoiseach has repeatedly said that corporation tax is not up for negotiation but has agreed to constructively engage in debate on the common tax base legislation.