Brussels, 07/07/2004 (Agence Europe) - The Commission "noted" but did not really discuss two working papers on corporate taxation prepared by Commissioner Frits Bolkestein for the informal Ecofin Council of 11 September (see yesterday's EUROPE, p.9).
The first paper concerns the creation of a common tax base for companies. At this stage, the Commission is not seeking an agreement or support in detail but needs an indication of the number of Member States that are prepared to support the principle of working on the common tax base, it says. In other words, the Commission calls on the Member States that wish to move forward on corporate tax to make themselves known. Its proposals of harmonisation launched in 2001 have remained dead letter except that France and Germany recently attacked what they call "tax dumping" by new Member States and call for the creation of minimum and maximum taxation rates. The document notes it is significant that, although several Member States seem willing to support the work on a common basis, it is partly linked to the question of rates. The Commission suggests creating a working party between Member States on the matter of the tax base which, it says, would preferably include all Member States but which, for more indepth discussions, could be formed of a parallel group with a more reduced number of Member States. A method that could prepare advantageously the strengthened cooperation on fiscality, ideas already suggested by Commissioner Bolkestein and advocated by France and Germany despite the opposition of the United Kingdom.
The paper, moreover, raises a series of practical issues: 1) Should the European base be compulsory? This would make tax fraud more complicated, but it would be difficult "to be realistic" for the Member States to accept, the Commission says; 2) Should the tax base apply to all companies? The Commission is more in favour of application to companies quoted on the stock exchange or with share capital over a certain amount; 3) Should one focus on the consolidated accounts? Yes, the Commission says, although this will have to be reached in several stages.
A second paper covers the taxation of small and medium-sized companies in their State of origin. In practice, the Commission seeks to circumvent the experts delegated to Council who, in March 2004, unanimously rejected the pilot project for taxation of SMEs in the State or origin proposed by the Commission. They felt that the project would require too much red tape for a meagre result. The Commission on the other hand considers that a pragmatic and modest approach such as this, made to mobilise the growth potential of SMEs must not be scuppered by administrative inertia.