Brussels, 08/04/2008 (Agence Europe) - How can tax policy contribute to growth and competitiveness without ignoring social issues, asked EU Taxation Commissioner Laszlo Kovacs, opening the Second Tax Forum on Monday 7 April 2008, which was attended by more than 600 participants. Mentioning the challenges facing the tax systems in EU member states from economic globalisation and the ageing population, he observed that there was a trend to gradually reduce direct taxation and replace it with indirect taxation in order to reduce the tax burden on labour. French Socialist MEP Pervenche Beres said the EU was finding it difficult to give itself the tax tools it needed to meet its ambitions. She noted the growing complexity of European Court of Justice case law, adding that a special study would be unveiled at the European Parliament committee she chairs in the near future. French Finance Minister Christine Lagarde resumed her country's tax policy, noting there would be fewer tax and social security deductions in the medium-term and better taxes immediately, while boosting France's competitiveness through aid for research and the environment. She admitted that the tax burden was very high in France, which funded a high level of public services, infrastructure and social protection. One can't have one without the other, she explained.
Laszlo Kovacs mentioned work being carried out at EU level to boost growth and jobs, like the future draft directive to establish a common consolidated company tax base (CCCTB) at EU level. Given the diversity of national company tax systems, it did not make any sense to compare tax levels if what is actually being taxed is different, he said. He noted that the existence at the moment of 27 different tax systems caused problems when it came to transfer prices, recovering cross-border losses, double taxation and restructuring costs for businesses. EU Enterprise Commissioner Gunter Verheugen said the CCCTB would help ensure smooth functioning of the single market because at the moment, European SMEs do not dare venture beyond borders due to the sheer complexity and diversity of national tax systems. It would be an extremely positive move if there were agreement on a tax basis, said Lagarde. This is one of the French Presidency's priorities for the second half of 2008. Beres disagreed with speakers calling for a flat rate of company tax.
Philippe de Buck, Secretary General of BusinessEurope, argued in favour of the CCCTB but recognised that views differed within his organisation. He made it clear that the debate was about the tax basis rather than the tax rate since tax rates were part of legitimate tax competition. Michel Aujean from the French law firm Taj, and a former expert at the European Commission, said he favoured a broad common company tax basis, which implied low taxation and would make it possible to restrict tax exemptions and niches to the minimum. Everyone will win, he said, calling for limits to be placed on exacerbated tax competition that only attracts neighbours' profits rather than creating wealth at EU level. Tax expert for General Electric and the American Chamber of Commerce in Brussels William H. Morris said that a consolidated tax base would be in companies' interest because it would enable them to cut their administrative costs and solve problems concerning the sharing of losses and the price of transfers. He was concerned about the CCCTB no longer being optional for companies (Germany has expressed the desire that the CCCTB be made compulsory).
Green taxation. Asked about the option of reducing VAT on products with a low carbon footprint, Kovacs said he had immediately backed the idea when it was launched (a Franco-British initiative from Nicholas Sarkozy and Gordon Brown, see EUROPE 9532). Industry agrees but feels that use of reduced rate VAT for green products was not the best solution, he said. The problem is deciding exactly which products would be covered by reduced VAT because, the commissioner explained, things that can be used to make energy savings today will not necessarily be the ones used to save energy in the future. The commissioner said that at the end of June or early July, he would be unveiling an initial package of legislation to deal with the most pressing problems in the EU reduced VAT system, namely labour intensive services and cafes and restaurants (see EUROPE 9559). A second package of legislation should follow on low energy products, he said. Lagarde said that the French Presidency would try to get the ball rolling in the second half of 2008 on the idea of reduced taxation on so-called green products. She also called for greater account to be taken of the environment in EU Directive 2003/96/EC on energy taxation and for an approximation of diesel duty (see EUROPE 9385). (M.B.)