FRANCE PLANS to push hard to encourage EU states to agree a common method of computing corporate taxes during its upcoming six-month presidency of the union.
French finance minister Christine Lagarde has dismissed Irish concerns about the plan, saying that she "hadn't met any Irish people that were afraid of anything".
"It has been going on for a long time, it's an issue that we are determined to push," said Ms Lagarde, who was addressing a conference on taxation in Brussels yesterday, alongside EU tax commissioner Laszlo Kovacs, who is drawing up the tax proposal.
Mr Kovacs said his proposal would be published in the autumn. It is expected to recommend that EU states should draw up common rules for computing corporate taxes to enable multinational firms to compare national tax regimes more easily.
Ms Lagarde's support for the commission's plan to introduce a common consolidated corporate tax base throughout the EU will alarm the Government. It has lobbied hard at EU level to have the proposal scrapped in the run-up to the referendum on the Lisbon Treaty, fearing it could persuade some business people to vote no.
Commission officials have indicated privately that the controversial tax plan would not be presented prior to the Irish referendum, which is the only public vote due to be held on the Lisbon Treaty in the EU, for fear of provoking a negative reaction.
The core of Mr Kovacs's plan is that the profits of businesses operating in more than one EU state should be calculated according to a single EU-wide formula, rather than the 27 formulae currently used. Profits would then be reallocated to the countries in which the businesses are active, to be taxed at the tax rates of those countries.
But he is also considering consolidation, which could see profits being allocated between countries using measures including size of payroll, value of asset base within a particular country, sales or other measures. One device under consideration by the commission is the introduction of a "sales factor" into the formula, which should be based on "sales by destination".
Under the "sales by destination" formula a member state such as the Republic with a small population would lose substantial tax revenue. This is because it would divert a portion of a company's corporate tax payments to the EU state where the consumer buys the product, rather than the state where the firm is based.
The Government fears the plan would undermine tax competition and its own 12.5 per cent corporate tax rate, which has supported the Republic's economic success.
Asked how she felt she could overcome Irish concerns about the plan, Ms Lagarde said she would be as "comprehensive and argumentative as she could to convince all her EU colleagues to support the strategy". She added that she had not met any Irish people that were afraid of anything but refused to speculate on whether France would support a smaller group of EU states to move ahead on their own with the tax plan.
France takes over the EU presidency in July from Slovenia and will chair all meetings of the EU finance ministers at the council of ministers.
A spokesman for Minister for Foreign Affairs Dermot Ahern said last night the issue of tax harmonisation had nothing to do with the Lisbon Treaty. "Ireland has a veto on tax so regardless of what the French talk about, it is irrelevant . . . Ireland's corporate tax regime is one solely for Ireland. If others want to join us, well and good. But there is no mechanism by which our taxation system can be changed without our consent."