Commissioner Kallas: EU not planning unified corporate tax

  • 2005-11-02
  • From wire reports
TALLINN - European Commission Vice President Siim Kallas said the commission was planning to establish a common tax base for companies in different EU states and not impose a common rate of corporate income tax.

"By determining the tax base we would describe on what we are paying taxes," Kallas, who is from Estonia, told reporters on Oct. 28. "That would help to prevent a situation where large companies aren't paying a single penny in taxes."

He said the possibility of imposing a unified income tax rate hadn't been discussed in the commission, nor was there a plan to impose one in the future.

"The current plan would harmonize the tax base, while the tax rates would remain different," he said.

The issue of member states' tax rates - which vary significantly among 25 countries - has been a thorny issue, with EU majors France and Germany railing on small countries' lower rates. Some, including outgoing German Chancellor Gerhard Schroeder, have referred to them as "tax dumping."

Indeed, many medium-sized firms have moved their bases of operations East in search of a more favorable tax regimen and labor laws.

Kallas stressed that even though Estonia was using a zero tax rate for reinvested corporate profit, taxes still make up a considerable size of GDP compared with the country's European peers.

"In Estonia the ratio of corporate income tax to GDP is 1.6 percent, for instance, whereas in Germany it is 0.8 percent," Kallas said.

The commission's proposal to introduce a common tax base is opposed by Britain, Ireland, Estonia, the Czech Republic and Slovakia. The Britons and Irish are against the plan because in their opinion the commission is overstepping its competence and impinging on national sovereignty.

Estonia, Czech Republic and Slovakia fear that with the introduction of a uniform tax base the rate would go up.

Ivo Vanasaun, head of the service for direct taxes at Estonia's Finance Ministry, said Estonia is in favor of harmonization of the tax base as long as the extent to which this is going to be done remains reasonable.