IBEC has rejected proposals that there should be an EU-wide common corporate tax base, warning such a move could ultimately lead to higher taxes.

The proposal was made yesterday by European Commissioner Mr Frits Bolkenstein who said EU governments should move towards a common corporate tax base to avoid distortions or double taxation and spur cross-border business activity.

However, IBEC's director of economic affairs, Mr Brian Geoghegan, said it was clear that the existence of a common base would greatly facilitate moves towards a mandatory common system.

"Our fear is that this would inevitably lead to higher taxation on companies as a whole in the EU," he said.

He said that a mandatory system would mean higher taxes on companies in many EU states.

Mr Bolkenstein said the EU sorely needed more tax reforms if its economy and companies were to become more competitive.

Mr Bolkenstein, who is the EU's top regulator for internal market issues, said companies operating across Europe still faced extra costs and burdensome red tape due to the 15 different systems for calculating taxable income in the region.

Without an effective strategy to rationalise tax rules for companies, the EU risked missing its target of becoming the world's most competitive economy by 2010, the commissioner said.

"Without determined action on the tax front, the European Union will miss its self-imposed goal of becoming in this decade the most competitive and dynamic knowledge-based economy in the world," he told a conference on fiscal reform for business.

However, Mr Geoghegan said the proposal to consolidate tax rates would lead to higher tax rates and drive investment out of the EU.

"The 'one size fits all' mentality which takes no account of local or regional circumstances is not just mediocre; it will actually damage the EU economy itself, particularly in light of an enlarged Union," he said.