Brussels, 23/10/2001 (Agence Europe) - On Tuesday, the European Commission unveiled its company taxation strategy, suggesting having a single consolidated tax base. A 400-page study notes that the differences in effective company tax rates are attributable mainly to differences in national statutory tax rates rather than differences in the size of the tax base. In a press release, the Commission says it believes "that company tax rates are a matter for Member States to decide".
The Commission has tackled the most flagrant obstacles by proposing to: 1) revise Council Parent-Subsidiary Directive (90/435) on dividends and the Merger Directive (90/434) in order to cover taxes on cross border company restructuring and companies that will be covered by the European Company Statute in 2004; 2) withdraw and rehash the Directive on cross-border tax relief which has been in deadlock at Council level since 1990, in order to "overcome Member States' reluctance to consider any EU initiative in this area". The Commission will launch consultations with Member States in 2002 in order to unveil a text in 2003. It is planning to either calculate losses according to the legislation of the state where the parent company is based, or work on the basis of a new Danish system for taxing a company's consolidated profit/loss in order to prevent companies being taxed on profits made in one Member State without at the same time being able to take into account losses in another country; 3) organise an "EU Joint Forum on Transfer Pricing" in 2002 to establish better coordination between Member States to avoid double taxation; publish a Directive in 2003 to improve the Arbitration Convention and make its provisions subject to interpretation by the Court of Justice; 5) present a Communication on Double Tax Conventions in 2004, proposing a European version of the OECD Model Convention.
The Commission is considering two options for creating a Common (Consolidated) Tax Base: 1) taxation according to the rules in force in the state where most of a company's activities are located; and 2) creating a common company tax code that will apply throughout the EU, along with a mechanism for dividing company tax receipts among the Member States concerned. The Commission has not ruled out adopting such a code using the "strengthened co-operation" procedures outlined in the Nice Treaty.