A common tax base for European Union firms would threaten the benefits some member states enjoy from offering low tax rates, EU Internal Market Commissioner Charlie McCreevy, said today.
Mr McCreevy is not responsible for tax in the 25-nation bloc and was breaking ranks with the Brussels executive, which only last week agreed that a common consolidated tax base proposal could be made as early as next year. There are no plans for a harmonised tax rate.
A common, consolidated tax base would allow EU firms to use the same method to calculate their taxable profit in all member states, which the Brussels executive said would make life cheaper for firms.
But the former minister for finance whose strong economic growth has been partly attributed to attractive corporate tax rates, dismissed this.
"In my view it is important that EU member states compete against one another on the tax front," Mr McCreevy said in remarks prepared for a KPMG tax conference.
"Tax competition between member states is healthy in that it keeps pressure on governments to watch their domestic spending and keep their tax regimes internationally competitive," Mr McCreevy said.
Member states with big deficits should make their economies more flexible, as the Irish experience has shown, he said.
"A consolidated tax base would divide up the EU corporate tax base in a way that favours some member states over others, and would risk negating many of the benefits enjoyed by member states that have current low rates," he added.
EU Tax Commissioner Laszlo Kovacs said last week the Commission was likely to model its proposal on the Slovak corporate tax system, which had no exceptions, no exemptions or special regimes.
Mr Kovacs said most EU member states and business groups supported the idea of such a common tax base, because it would remove red tape, spur competitiveness, cut costs for firms, diminish distortions in competition and reduce the scope for fraud and tax evasion.