Brussels, 20/05/2011 (Agence Europe) - By 18 May the end of the consultation period in the early warning system for verifying whether draft EU legislation respects subsidiarity, the parliaments of eight member states (Ireland, the UK, the Netherlands, Bulgaria, Sweden, Poland, Malta and Romania) had sent in negative reasoned opinions about the draft legislation on a common consolidated tax basis for corporate tax (see EUROPE 10338 and 10336). Of the 16 countries that have examined the draft legislation, only Portugal and probably Italy are reported to have responded favourably.
The number of doubting member states, however, is below the quorum (one third of member states) for forcing the European Commission to withdraw the draft legislation and the negative opinions have no bearing on how the draft legislation proceeds, explains the Commission. It will reply to the member states and take account of their observations, amending the draft legislation where required, and submitting the draft legalisation under the usual procedure to the European Parliament and the EU Council of Ministers, which will have to endorse any changes unanimously.
Various objections have been raised, the most critical from Ireland, which sees the legislation as an attempt to harmonise corporate tax throughout the EU, and from the United Kingdom, which says that the legislation would restriction the government's ability to shape its own tax policy. Other criticisms are voiced by the Netherlands and other countries about the cost of the planned changes and a damaging impact on their countries' competitiveness.
There seems to be consensus among business circles about the need for harmonised rules and a common method of calculating corporate tax, but the fact that the new calculation methods would be optional is roundly criticised because it would introduce legal uncertainty and increase compliance costs. The most controversial aspects for Germany are the “one-stop shop” and consolidating a company's profit or loss across all EU member states in which it does business. The method of sharing out tax income/losses among member states (see EUROPE 10338) is described as over-cumbersome and would lead to a loss of tax income for some countries. Moreover, the draft legislation does not eliminate tax competition among member states because the actual rate of taxation is decided by the nation state. There will be a bumpy road ahead and it may take years to introduce the legislation because unanimous voting is required. (F.G./transl.fl)