How many Member States are interested? Frits Bolkestein's paper aimed at making progress in the harmonisation of the Common Consolidated Corporate Tax Base is, thanks to its balance and pragmatism, a useful contribution to attaining this objective (see this column yesterday). The Commissioner clearly stated that, at this stage, he is not seeking a detailed agreement or explicit support from the Council. His aim is for now to verify - at the informal meeting of Finance Ministers scheduled for 11 September in Scheveningen - how many Member States are interested in his proposal. If there are 25 then so much the better. Otherwise, Mr Bolkestein plans to explore the formula of enhanced cooperation between the countries that follow his line. The technical elements already incorporated into the document aim to clarify the nature of the difficulties and solutions possible. Ministers are invited to give their reaction. An ad hoc working group should then be created to bring the administrations of the countries interested together.
Mr Bolkestein stresses that the aim is in no way to reduce the level of corporate taxation, but to create a more effective and neutral method for such taxation, by eliminating the detrimental effect that results from having 25 different tax bases: complicated costs, additional costs, time wasted - all factors that adversely affect Europe's competitiveness. The Commissioner considers it appropriate for experts of the private sector to be involved in the work as the business world would lose interest in the dossier if it were not directly involved. Exclusion would mean that the business world's technical and practical experience is not being taken into consideration.
Three obstacles. Should one imagine that the dossier will move forward without any hitches? This would be all too easy. The matter largely exceeds the taxation technique area involving considerable economic and political repercussions. The first obstacle is the reticence on the part of a number of Member States in accepting the enhanced cooperation formula as these States would feel excluded. They are countries which, like the United Kingdom, are opposed to uniform European provisions on the taxable base (despite the fact that they are optional) and which, of course, do not like projects carried out without their participation. Is there any need to say that I find such an attitude, if confirmed, unacceptable? The rule is that no Member State can be forced to take part in doing things that it does not support, but it cannot prevent the others from doing so. This is the purpose of the enhanced cooperation instrument. One must quite simply apply the provisions of the treaty on this (the Bolkestein paper cites these provisions: Articles 43, 43A, 43B, 44, 44A and 45 of the consolidated EU Treaty resulting from the Treaty of Nice).
And the rates? The second difficulty lies in the fact that the priority concern of the social, economic and even political worlds of some Member States as far as corporate taxation is concerned does not concern the tax base but rather the rates. This is precisely the aspect that Mr Bolkestein does not wish to take into consideration. Currently, the differences are huge, ranging from 0% in Estonia (for profits reinvested in the same location) to 38.3% in Germany. The risk of relocation caused by such differences does not only worry the social circles (which define this as “tax dumping”) but was also denounced by the highest political authorities of several Member States. Chancellor Schröder has spoken of it and the French Foreign Minister Michel Barnier has also brought the matter up (in Brussels even, at a Community meeting). Also, at the end of June, Mr Eichel and Mr Sarkozy (German and French Economy Ministers) implemented a joint approach inviting the Commission to propose not only a uniform tax base but also, “if possible, minimum rates”. Chancellor Schröder admitted that this is not an immediate objective and that the important thing is to open the debate. But some social and political forces have no doubt been in more of a hurry, as can be seen by the number of questions raised on this subject before the Commission's president-designate, Mr Barroso, during his meetings with the EP political groups.
Eight countries to be found. The third difficulty lies in the requirement for finding at least eight Member States willing to create enhanced cooperation. This is the minimum number prescribed by the Treaty (Art. 43g). According to unofficial calculations, France, Germany, the Netherlands and Austria are interested; Spain, Sweden, Belgium and Luxembourg could be. To this could be added other countries. At first sight, we have the number needed.
We must still say a few words about the second Bolkestein document relating to SMEs (small and medium-sized enterprise) that are active in several Member States. Instead of applying the common tax base, they would be authorised to apply the system of the country of origin everywhere while respecting the tax rates of each country where they operate. A proposal along these lines already existed but national experts rejected it as they considered it would involve too many administrative complications for such a meagre result. Mr Bolkestein hopes that, in a wider context, it will receive a warmer welcome.
(F.R.)