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Companies need to join forces in lobbying campaign Back  
As EU Commissioner Laszlo Kovacs continues to generate more heat behind his campaign to introduce a common basis for corporate taxation in Europe, the Irish financial services industry is being called upon to act together against his efforts.
Internationally focused businesses based in Ireland are being urged to join forces to establish a lobbying campaign against efforts at tax harmonisation at a European level.

Writing in this month’s Tax Monitor, editor Brian Daly says that in order to effectively support the efforts of Government a proper lobbying campaign needs to be undertaken.

‘Collectively, the Irish government, the Irish tax profession and representatives from Irish industry now need to increase focus on the conceptual and technical arguments and do our best to raise awareness levels in relation to the pitfalls before a legislative proposal is issued in 2008,’ he writes.

The European Commission, under Commissioner for Taxation and Customs Union Laszlo Kovacs, has steadily been making progress on its Common Consolidated Corporate Tax Base (CCCTB) proposal, which is designed to introduce a common base for the taxation of corporate profits across Europe.

While the CCCTB is supposed to be optional, Daly argues that, ‘given reduction in cost and administrative burden is one of the key stated objectives of the regime, running an additional optional system alongside the 27 existing systems makes no sense in the longer term’.

The CCCTB proposes that the profits of businesses operating in more than one EU member state should be calculated according to a single EU-wide formula, rather than the 27 different formulae used today. Profits would then be reallocated to the countries in which the businesses are active, to be taxed at those countries’ tax rates.

In a report presented to the CCCTB working group , which consists of tax experts from the 27 member states, in October, the Commission set out a possible outline of the principles of a CCCTB by ‘beginning to bring the various structural elements of the base together into a coherent set of rules’. A key element of the report is the introduction of a ‘sales factor’ which would divert a portion of a company’s tax receipts to the country where the product is bought - rather than to where the company is based.

Daly can expect to win support for his proposal from many quarters of Irish business and financial services. Speaking at the recent Institute of Chartered Accountants in Ireland (ICAI) annual dinner, president Vincent Sheridan, chief executive of the VHI, also referred to the growing movement among the larger European countries towards tax harmonisation.

He warned, ‘Any such move, if successful, would be a major threat to one of the main planks of our economic strategy. It must be left open to all member states - and to the smaller countries in particular - to put together a competitive package to enable both domestic and international companies operate from within its borders. This is essential if countries like Ireland are to remain competitive not just within Europe but in the ever more important wider global economy’.

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