Proposals for changes to EU tax laws will prove "very damaging to business and to the interests of the wider economy", the Irish Bankers' Federation claimed today.
Commenting on plans announced by EU Commissioner for Taxation and Customs Union László Kovács today, the IBC said it was "vehemently opposed" to any attempts to introduce a common consolidated corporate tax base (CCCTB).
David Croughan, Ibec
Business group Ibec also reiterated its "strong opposition" to the moves.
Among the measures outlined by Mr Kovacs are a common corporate tax base which would apply to the financial services industry. The corporate tax base in a number of member states would change as a result of this.
Ireland's low rate of corporation tax, which is seen as key to attracting and retaining continued foreign direct investment.
Under the commissioner's plan, the EU would set an EU-wide tax authority to oversee the process of introducing common corporate taxes.
The IBF, which represents over 60 financial institutions in the State, said it regarded the proposals as "deficient in their own right and as a gateway to a common corporate tax that would be very damaging for Ireland".
It said the plans would undermine Ireland's competitiveness and that the flexibility every member state currently has to amend its tax system to reflect its policy priorities would also be lost.
The commissioner, the IBF said, had not produced any analysis in support of his claim that they will enhance European competitiveness.
IBF chief executive Pat Farrell said: "As an open, trading economy operating in a very challenging global environment, it is imperative that we maintain what competitive advantages we have and that we continue to sharpen our competitiveness at every opportunity. This is as true for financial services as it is for any other sector of our economy.
"We strongly oppose the CCCTB proposals because they are in themselves very deficient and because they are the gateway to a common EU corporate tax that will further undermine Ireland's competitiveness."
Ibec said that, contrary to the Commission's claims, would not strengthen the competitiveness of the EU.
They would be "particularly damaging to the economies of smaller member states such as Ireland", Ibec claimed.
Ibec chief economist David Croughan said the proposal would almost certainly lead to an increase in companies' tax bills by transferring taxable profits to the regions with large populations.
"This would also result in lower revenue from corporation profits in smaller countries, which could lead to other taxes being increased to offset this loss of revenue. It would effectively result in a transfer of resources from smaller countries to larger ones," he said.
"In the case of Ireland, which exports the greater part of its output to the larger central economies of the EU, companies would see part of their profits, currently taxed at 12.5 per cent, apportioned to other higher taxed member states such as Germany or France.
"Such countries, who have made no secret that they see the introduction of CCCTB as a first step to tax rate harmonisation, would benefit from higher tax revenue earned by companies located in Ireland."
Mr Croughan said policy makers must be able to react rapidly to changing economic circumstances and developments in other tax jurisdictions.
IBF chief executive Pat Farrell
"The CCCTB will ultimately reduce the flexibility of the EU's corporate tax system as the agreement of a large number of member states will be required in order to make any changes. The additional administrative layer will also make change more difficult."
Mr Kovács said today he is not proposing any harmonisation of tax rates throughout the EU.
"We are now entering the crucial phase where technical fine tuning and strong political support are needed," he said.
"I know this project is an ambitious one and has raised some scepticism from certain member states and questions that are to be answered. I expect all the stakeholders in favour of the project to advocate the CCCTB as the solution to eliminate existing fiscal obstacles throughout the European Union, help companies to improve their competitiveness and make Europe a more attractive place to do business."
According to the Department of Finance: "Ireland supports the Commission's efforts in transforming the European Union into the most competitive economic zone in the world but we do not believe that the introduction of a Common Consolidated Corporate Tax Base could advance the Lisbon Agenda nor that it could improve the competitiveness of the European Union."
A statement on the Department's website continued: "Our position on the CCCTB is well known. We do not favour it for reasons of principle and practicality. The proposal cuts across national sovereignty and subsidiarity. We believe that choices on taxation and expenditure are matters for each member state. It is for each member state to decide on the structure of its own tax system reflecting its historical traditions and social and economic priorities."