MEPs vote in favour of tax harmonisation

Members of the European Parliament voted yesterday by a three to one majority in favour of a plan to harmonise the tax base across…

Members of the European Parliament voted yesterday by a three to one majority in favour of a plan to harmonise the tax base across Europe. The decision by MEPs may lead to legislation to create a common set of rules for companies to determine their taxable revenue.

European taxation commissioner Laszlo Kovacs told MEPs that the Commission had no intention of limiting competition or using a consolidated corporate tax base as a way of aligning tax rates. Mr Kovacs, who strongly supports the move, said the commission was working towards a common basis to calculate taxable income for companies involved in pan-European business.

However, Fianna Fáil MEP Eoin Ryan has rejected this view calling yesterday's vote the "thin end of the wedge" on the road to tax harmonisation. Mr Ryan sits with Fine Gael MEP Gay Mitchell on the Economic and Monetary Affairs Committee of the European Parliament which produced a report on the issue. Speaking after the vote, Mr Ryan said the endorsement by MEPs was "setting up Ireland for a change to our corporate tax rate".

"There are a lot of countries that do not believe in reforming their economies and are looking at Ireland's corporate tax rate. They can have a 12.5 per cent too, if they want. The issue is reform."

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Mr Mitchell also opposed the idea telling MEPs during the debate there was "no more a case for harmonising corporate tax rates or bases than there is for harmonising property taxes, wealth taxes or capital gains tax."

He said a harmonised tax base would cut across national sovereignty. "How is it possible to separate the issue of tax base from the issue of tax rate? Would the harmonisation of the base not lead to a harmonisation of the rate?"

Ireland's EU commissioner Charlie McCreevy also opposes to the proposal. Although he did not speak at the debate he has described Mr Kovac's plan as bringing tax harmonisation in through the "back door".