The introduction of Common Consolidated Corporate Tax Base is European Commission policy

The European Commission initiates all EU laws.

The issue of the Corporation Tax rate and of a Common Consolidated Corporate Tax Base is absolutely crucial to Irish jobs. Having the power to maintain a low corporation tax rate is one of the linchpins of Irish economic success in recent years, and one of the reasons why Ireland has attracted such high levels of inward investment.

It is European Commission policy to introduce a Common Consolidated Corporate Tax Base.

Briefly, CCCTB is a uniform method or set of rules for corporate businesses to calculate what is taxable and to whom the tax is payable.
CCCTB also requires an allocation criteria or mechanism with which to ‘share out’ an enterprise’s consolidated tax base among the Member States.

The programme on CCCTB is well advanced and the Commission's legislative proposal will be made public in September 2008.

"The European Commission believes that the only systematic way to address the underlying tax obstacles which exist for companies operating in more than one Member State in the Internal Market is to provide companies with a consolidated corporate tax base for their EU-wide activities."

Background
This policy was established in 2001.
A public consultation was held in 2003.
In July 2004 a non-paper on the common tax base was presented by the Commission.

On 2 May 2007 the Commission adopted a Communication stating it was "committed to making rapid progress towards the abolition of corporate tax obstacles in the internal market".

The CCCTB plan is included the annual work programme of the European Commission for 2008 which was set out in October 2007, Page 7. “Work will also be continued in order to allow companies to choose an EU-wide tax base as set out in the 2008 Annual Policy Strategy. An impact assessment has been launched to examine the options and their implications.”

In September 2007 the Commission Services prepared a working paper on CCCTB.

The European Parliament is also fully in favour of introducting CCCTB. (cf page 3)
The EU Tax Commissioner has acknowledged wide support in the Parliament for the CCCTB.

EU Court of Justice has made many decisions about direct taxation

The European Court of Justice decides on matters of dispute between EU member states.

The Court of Justice (ECJ) is based in Luxembourg.
Its job is to make sure that EU legislation is interpreted and applied in the same way in all EU countries.
The Court also makes sure that EU member states and institutions do what the law requires. The Court has the power to settle legal disputes between EU member states, EU institutions, businesses and individuals.

The European Court of Justice has a long history of making and enforcing decisions about direct taxation including Corporation Tax.
See Tax Lawyer Loyens and Loeff newsletter under direct taxation.

On October 12, 2007, the The EU Commissioner for Tax, spoke at an international conference on "The Future of Company Taxation in Europe" organised by the Austrian Ministry of Finance. While speaking on CCCTB, Lázló Kovács told his listeners that (cf page 7):

"I want to remind you of the growing number of decisions by the European Court of Justice in the field of company taxation and the effects these rulings have had on Member States tax systems."

Primacy of the ECJ and EU law

Declaration 17 titled " The Declaration Concerning Primacy" - which is attached to the Lisbon Treaty. This draws attention to the case-law of the EU Court of Justice, where in several ECJ judgements over the years the Court makes reference to the primacy of EU law, the direct effect of EU law, the superiority of EU law over national Constitutions as well as statute law, and the fact that the European Community is a "distinct constitutional order". EC/EU law is superior only in the areas covered by the Treaties of course, where lower States have surrendered their right to decide.

Lisbon Declaration 17 concerning primacy provides that: "The Conference recalls that, in accordance with well settled case law of the Court of Justice of the European Union, the Treaties and the law adopted by the Union on the basis of the Treaties have primacy over the law of Member States, under the conditions laid down by the said case law."

Treaty of Lisbon route to CCCTB by Enhanced Cooperation

The Treaty of Lisbon's Enhanced Cooperation Provisions:
The mechanism for Enhanced Cooperation - when 9 states or more go forward together is outlined in Article 280d/TFU Article 329 of the Treaty of Lisbon.

280e/TFU Article 330 clarifies that:
Unanimity shall be constituted by the votes of the representatives of the participating Member States only.

Article 10/TEU Article 20 wrote:
2. The decision authorising enhanced cooperation shall be adopted by the Council as a last resort, when it has been established that the objectives of such cooperation cannot be attained within a reasonable period by the Union as a whole, and provided that at least nine Member States participate in it. The Council shall act in accordance with the procedure laid down in Article 280D of the Treaty on the Functioning of the European Union.

As such, if we vote yes to Lisbon, CCCTB can be introduced by a minimum of 9 states.

Distortion of Competition

Article 2.79 of the Lisbon Treaty proposes an important amendment to Article 93 of the Consolidated EU Treaties, which at present makes some tax laws across the EU a mandatory requirement, although that must be done by unanimity.

The five-word amendment states that such harmonisation must take place if it is necessary "to avoid distortion of competition".

TL/en 93
79)/ At the end of Article 93, the words "within the time limit laid down in Article 14" shall be replaced by "and to avoid distortion of competition."

Consolidated article 93
'The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition. '

What type of tax is Corporate Tax? What about CCCTB? Neither are defined in existing treaties. Any disputations of this and whether it leads to 'a distortion of competition' can be referred to the European Court of Justice.
Matters concerning the Internal Market come under the majority voting rule.

Another Back Door to forced change: Opinion of Libertas Group
'Back Doors to Increased Taxes
'Article 93 of the Lisbon Treaty opens another door to EU tax meddling. Where national differences in company tax lead to "distortion of competition", it would enable the European Court of Justice to apply the internal market rules on competition, where majority voting applies, to matters of corporation tax thus bypassing our much touted “Tax Veto”, which is relevant to tax harmonization but not other key aspects of Ireland’s tax policy. -

How it will happen - Out with a whimper, not a bang.

The French want harmonised CCCTB - so do the Germans, and the Italians, and the Dutch etc.....

How are they going to introduce CCCTB? By Enhanced Cooperation
How is this effected by Treaty of Lisbon? Makes it easier to happen, increases blocking minority needed

'László Kovács, the commissioner for taxation, told MEPs on Tuesday (11 December) that a CCCTB proposal would still be published, but after the summer break. He said that two-thirds of member states supported a CCCTB. He expressed readiness to introduce proposals through enhanced co-operation if there was no unanimity among member states. Under the 1999 Treaty of Amsterdam, member states may use enhanced co-operation to proceed in adopting laws in areas like taxation which would normally require unanimity.'
The European Voice, Dec 13, 2007

That the enhanced cooperation provision can be used to introduce CCCTB is also laid out clearly in the Bersani Report passed with a huge majority in the European Parliament:
"The objective of introducing a CCCTB at European level could also be achieved through the mechanism of enhanced cooperation if Member States are unable to reach unanimous agreement. The mechanism - though representing a second-best option compared to the unanimous agreement of Member States - would allow the great majority of European countries to progress in the field of a common framework for company taxation while affording the other Member States the possibility of joining in at a later stage."

The Bersani Report said: "Parliament advocated a step-by-step approach, with the initial introduction of an optional common consolidated tax base - which will leave enterprises the choice between existing national tax bases and a European tax base - followed by an assessment in the medium term to examine the advisability of moving to a compulsory common consolidated tax base."

The Ten Steps to end Ireland Inc.:

1 The EU Commission wants CCCTB, the majority of the member states want it, the Euro Parliament is in favour.

2 There are enough states (min 9) to introduce CCCTB through enhanced cooperation.

3 This 'Enhanced Cooperation' group decide among themselves that CCCTB will be paid according to sales destination.

4 Bigger EU states within Enhanced Cooperation Group where goods are sold want to get money off Irish companies selling goods in their state.

5 Irish politicians and Irish resident companies resist, saying we are not part of Enhanced Cooperation Group.

6 The EU Court of Justice has long form on cases involving direct taxation - Bigger states refer dispute to the ECJ which decides that current tax system is causing 'a distortion in competition' - Irish resident companies must hand over money.

7 Irish resident companies must hand over portion of corporate tax, not to Ireland but to 'Enhanced Cooperation' countries where goods are sold.

8 Ireland's Corporate tax take decreases sharply, even though the Irish state retains its veto on Corporate Tax Rate.

9 Ireland is forced to choose whether to live with less Corporate Tax take or to increase Corporate Tax rate.

10 Ireland is forced, by powers outside its control, to 'voluntarily' increase the Corporate Tax rate. Veto is proved useless.

Some MEPs have suggested alternative legal routes in the Lisbon Treaty to exert pressure on Ireland to change its Corporate Tax regime. See here

If Ireland passes the Treaty of Lisbon it shall hand over vetos in 32 new policy areas, leading to less bargaining power with other states in negotiations.

Harm of Common Corporate Tax Base to Ireland

An Independent Consultant Report by HumeBrophy states that:

'CCCTB –Commission finalising proposal, targets September 2008 publication - Key Points

1 The European Commission is putting the final touches to its proposal for a ‘Common Consolidated Corporate Tax Base’
(CCCTB) – the new common criteria for calculating corporate tax for companies with operations in multiple EU Member States

2 The proposal will be ready for publication in September 2008, taking advantage of a supportive French Presidency of the European Union, while side-stepping Ireland’s Lisbon Treaty referendum

3 The Commission remains committed to calculating ‘sales by destination’ and will only agree to limited sector-specific formulae

4 The Irish government remains strongly opposed to the CCCTB proposal, but the proposal is backed by others – including larger Member States like France and Germany

5 CCCTB is bad news for Ireland and Irish business–Irish businesses face higher taxes, Ireland will likely be forced to change its bilateral tax treaties with CCCTB participating countries, while CCCTB wholly undermines Ireland’s fiscal competitiveness

6 An Irish veto will not stop CCCTB – the Commission has again made clear that it will push the proposal through via ‘enhanced cooperation’
Read full report here
An earlier Consultant Report in October 2007 warns that:

'Even if Ireland opts out of CCCTB, there will be significant implications for businesses operating in Ireland. Ireland will likely be forced to change its bilateral tax treaties with participating countries if ‘sales by destination’ is included in the final agreement.'

Business Lobby group, IBEC tolds its members about EU Commission plans on CCCTB before the Referendum:
Commissioner pushes common corporate tax system - 11/01/2006
Commission determined to push Tax Agenda - 05/02/2006
CCCTB: Barroso for, Mccreevy against - 01/06/2007

Barroso: EU countries could ignore Irish tax veto

Tax veto as useful as chocolate teapot

Chairman of pro-business Libertas, Declan Ganley said the assurances given by Barroso were worthless-
"It's laughable. In the week when we've now seen three separate reports confirming that the Government is in cahoots with the EU and other Governments to keep the truth of the Brussels Corporate Tax Plan from us until after we vote, we are now supposed to believe that the EU Commission President is going to "spontaneously" confirm that the Yes campaign is right?

"The truth is that while we may keep our tax veto, it will be about as much use as a chocolate teapot. No Government Minister or member of the Yes campaign can tell us what the European Courts will decide is or is not a "distortion of competition". Our tax rates at obvious risk given that the French will be empowered to take us to court over them."

Barroso's assurance on CCCTB while in Ireland.
Irish Independent April 18, 2008 - In a bid to quash Irish fears about a draft plan to harmonise the EU's corporate taxation base, EU Commission President Jose Manuel Barroso said the Reform Treaty will not change how member states deal with tax matters. He said nothing could be imposed on Ireland and that nothing can be agreed on taxation without the country's consent.

At Dublin Castle, Mr Barroso was asked by Naoise Nunn of Libertas to answer yes or no to the question of whether the ECJ could be asked to rule on whether Ireland's corporate tax rates "distort competition". Barroso refused to answer, saying the matter was 'too technical'. Barroso's answer on introducing CCCTB by enhanced cooperation in Sunday Business Post interview: is here.

Aked if the CCCTB proposal could go ahead under the procedures for enhanced cooperation?
Mr Barroso replied: "If there is enhanced cooperation for some member states, it is only to confirm the differentiation that Ireland wants. I don’t believe that scenario to be likely. Anyway, if some member states want to go ahead with some rules for their own, they have that right, this is true.
"By the way, this is exactly what Ireland wants. Ireland wants to have the right to have its own regime. -You cannot prevent others from wishing also to have a regime."-

Ergo, other states who wish can go ahead with plans for CCCTB under enhanced cooperation provisions of Lisbon.
This contradicts both Brendan Butler of IBEC: "The proposed CCCTB also needs all 27 members to sign up. If anyone says no, it has to be withdrawn." (Sunday Times 20/4/08 - Bus Sect. page 5)
And Dick Roche: "ANY CCCTB proposal would require unanimous agreement and there is no chance of that." (9/4/08)

Barroso's stance in Brussels

-The President of the European Commission, José Manuel Barroso, has expressed his full support for the strategy to harmonise the corporate tax base across the EU, which is currently being prepared by the Tax Commissioner, László Kovács. President Barroso also expressed hope that this strategy would be supported by the Member States.- Source
IBEC 01/01/2007

-Germany, France, Italy and Spain all favour CCCTB as does the President of the European Commission Jose Manuel Barroso.-
Irish Examiner May 2, 2007
The introduction of a CCCTB regime is EU Commission policy - see above post.

A Matter of Trust: Ahern says 'we retain our veto'

Bertie Ahern, who resigned in April 1st after revelations at the Mahon Tribunal

The Irish TImes, Thursday, December 20, 2007

Irish veto over EU tax changes will remain, Ahern states
Marie O'Halloran
Ireland will continue to have a veto over tax sovereignty, Taoiseach Bertie Ahern told the Dáil, as he was questioned about the EU reform treaty referendum.
He rejected concerns from Sinn Féin, the only party in the Dáil to oppose the treaty, about moves to have a common corporate tax base, and said he did not believe it was "the type of grand project that will ever progress into a policy area".
........
The Taoiseach did not think it would turn into a tax-harmonisation issue "and if I did, I would not support it. We still have our own protections".
Mr Ahern was referring to the "red line" areas of protection or special interest. "Tax sovereignty is an area over which we have a veto," he said.

Charlie McCreevy -"the claim that the CCCTB would have no impact on tax rates is unsustainable."

Charlie McCreevy - EU Commissioner, former Irish Minister of Finance.

EU battle on corporate tax looms
Sunday Business Post Sunday, May 20, 2007 - By Kathleen Barrington


The next government will have to fight Europe to keep our low corporation tax rate.

Charlie McCreevy, the Internal Markets Commissioner and former Fianna Fail finance minister, has been making no secret that he opposes Kovacs’s proposal for a common consolidated corporate tax bas e (CCTB), as he explained in a previously unreported speech to the Securities Institute earlier this month.

Kovacs wants agreement reached on common rules for taxable corporate income across the member states. To get common rules means member states have to agree on what costs are tax-deductible, what capital allowances are permitted, what accounting methods are used and so on. When all of this is agreed, the base of profits that is taxable would be clear and uniform across the member states.

For some member states, that will result in less income to tax. For others it will mean more income to tax. Kovacs is selling the proposal on the basis that it would cut red tape, enhance transparency and reduce compliance costs and is, in any case, voluntary. But McCreevy sees it as corporate tax harmonisation by stealth, and he is prepared to say so in less than diplomatic language.

‘Other things being equal, the change in the size of the tax base for each member state would mean that each member state would have to either raise or reduce its corporate tax rate to generate the same revenue as at present,’’ McCreevy said. ‘‘That’s the first reason that the claim that the CCCTB would have no impact on tax rates is unsustainable.

‘But it doesn’t stop there. The second leg of the scheme is more sinister. Having agreed the tax base on which the tax rate is imposed, agreement then has to be reached on how to share out the base between member states.”

He warned the designers of this scheme have put forward all sorts of different formulae including a share out based on criteria such as a member state’s sales or GDP.

‘Clearly, any such share out would benefit member states with large markets and big GDPs at the expense of member states with small markets and small GDPs,” McCreevy said. ‘‘This would be particularly unfair to the smaller, poorer member states of eastern Europe - and places like Portugal and Malta - who are seeking to build their economies from a low base, have small domestic markets, and relatively low GDPs.

‘Under a formula that included sales and GDP in the calculation, those member states would continually be on the back foot and find it almost impossible to catch up.”

Kovacs is arguing that the scheme will be optional, but that has not allayed McCreevy’s concerns as he worries that optionality is simply a way of getting a common tax rate in by the back door.

McCreevy reckons that after a year or two of the voluntary scheme being in place, member states would begin to complain about tax leakage. This will provide the perfect excuse to argue that the proposal isn’t working because it is voluntary and that the scheme should therefore become compulsory.

McCreevy argues that many of those who want to get towards the goal of full corporate-tax harmonisation realise that they have to be very careful.

‘But once you understand the game they are at - and the building blocks that they have in their back pocket - you get a sense of how the long-term, hidden agenda will be played out and why the current methods of a supposed ‘voluntary’ system are being used to put in place the building blocks for a longer term not-so-voluntary scheme in place,” he said.

‘The onus is on the advocates of the proposed voluntary scheme to demonstrate that it is not an unworkable charade and an underhand tactic to advance an agenda that would destroy tax competition in Europe, and with it undermine the incentive to manage individual member states’ public finances effectively and future direct foreign investment into the EU.

‘The real agenda of some of those seeking to push this agenda is one which would undermine competition, undermine small and emerging markets, undermine inward investment, and undermine the long-term growth and employment prospects of the union.”


McCreevy slams EC 'hidden' tax plan - Irish Independent, 12 May 2007
Brussels plan on common corporation tax a 'sinister idea that refuses to die'
"Optionality is not workable and it is hard to believe the designers of the proposal don't realise that," he said
"The deliberately unworkable proposals (for a common consolodated tax base) amount to a Trojan horse to enable the Commission take control of taxation", Commissioner  Charlie McCreevy suggested. He said that it  was part of a "long-term hiden agenda", a "sinister idea that refuses to die" 

Nicolas Sarkozy - harmonise taxes or else.

Nicolas Sarkozy - French President.

"It’s the case for taxation: we haven’t gone far enough in harmonizing the taxes on businesses and economic activities subject to competition. The result is that States are allowed to indulge in destructive competition on tax to attract businesses to their countries by cutting corporate tax, sometimes to zero. Tax dumping, which is prospering under the unanimity rule isn’t acceptable inside the EU. We must be able to clarify the division of powers between the Community institutions and States, according to the principles of subsidiarity and proportionality."

[In Sept 2004] Sarkozy was in interventionist mode when he contended that low corporate tax rates in the European Union's 10 new member states were unfairly sucking jobs from the west. His solution was as simple as the supermarket price cut: either the low-tax E.U. nations raise their rates or risk losing billions in E.U. development aid (see Au Revoir Les Jobs). "I'm not against outsourcing per se, I'm just demanding that the competition driving it is fair," Sarkozy says. "Nations can't claim to be rich enough to do away with taxes, while also claiming to be poor enough to ask other nations to provide funds for them. As with insecurité, the experts say, 'Outsourcing is a good thing. It leads to progress. Don't worry about it.' But the nation is scared." Sarkozy now proposes to grant €1 billion in tax breaks to companies that keep outsourceable manufacturing and service jobs in France, or relocate them to one of 20 "competitiveness zones" to be established around the country.
Time Magazine Oct 3, 2004

Pressure for EU tax harmonisation 2005-2006
The long and divisive EU budget negotiations in December have convinced some EU leaders that the EU should develop its own method of raising revenue, rather than relying on contributions from member states. Jose Barroso hinted as much in December saying that the EU needed a “system that would go beyond negotiations between countries”.
The measure has also won support from Hienz Fischer, the Austrian President, who said “if the EU had its own resources, it would be easier to negotiate its budget and therefore I support the idea.” EU Finance Commissioner Joaquin Almunia has also lent his support to the idea. He argued that the creation of a “community revenue” would help overcome divisions between member states over how much they contribute to the EU budget.

Tax rates have also become an issue for some on the Left in both Germany and France who have begun to complain about alleged “tax dumping” in Eastern European states. They argue that the lower tax rates favoured in many new member states give companies based there an unfair advantage, threatening jobs in ‘old’ Europe.
French Interior Minister Nicolas Sarkozy has contended that “tax dumping and social dumping must not be accepted within the EU. A country cannot claim to be rich enough to abolish its taxes and poor enough to receive European structural funds.” (European Review, 5 January)
The socialist German Finance Minister Peer Steinbruck went one step further urging new EU member states to raise their taxes and ensure "fair tax competition" among the 25 members of the bloc.
He told the German daily Die Welt that tax cuts in many of the new EU member countries have "nothing to do with fair tax competition and place a burden on German jobs… It cannot be, that some countries demand more funds from the EU budget while on the other hand failing to improve their own tax basis". German business groups responded arguing that the only way to stop German companies relocating would be to make the German tax rates more internationally competitive. (29 December)
Open Europe Bulletin

EU Tax Commissioner voices support for CCCTB

Laszlo Kovacs (EU Tax Commissioner)

European Voice New Report -László Kovács, the commissioner for taxation, told MEPs on Tuesday (11 December [2007]) that a CCCTB proposal would still be published, but after the summer break. He said that two-thirds of member states supported a CCCTB. He expressed readiness to introduce proposals through enhanced co-operation if there was no unanimity among member states. Under the 1999 Treaty of Amsterdam, member states may use enhanced co-operation to proceed in adopting laws in areas like taxation which would normally require unanimity. -

Mr Kovacs and EU President, José Manuel Barroso talk of harmonising the Corporation Tax Base even the in face of strong opposition from Ireland, the UK and Slovakia.
EU Commissioner on Tax, Mr Kovacs said in January 2006: ‘If it [the CCCTB issue] does not reach a consensus, we can go for a second round under enhanced cooperation with 18 countries.’
'But it is no secret that the issue is being considered in Brussels. Laszlo Kovacs, EU tax commissioner, on Monday (7/4/08) said "there is a real need for the member states to act together in certain tax policy areas" to increase competitiveness.
EU Observer

--Taxation Commissioner László Kovács confirmed that he will issue proposals on a common method for calculating corporate tax in September 2008.
He expressed confidence that the initiative would receive strong backing from the French government, which takes the helm of the EU presidency in the second half of the year.
“I have some high expectations of the French presidency both on direct and indirect taxation,” he said. France, Germany, Spain, Italy, Austria and the Benelux countries were, he said, “fully and actively” supportive.-- [European Voice 3/4/08]

At high level conference at Berlin on 15/16th May 2007 organised by German Federal Ministry of Finance, it was reported that:
'Mr. Peer Steinbrück, the German Minister of Finance opened the conference outlining the German position towards the proposal of a CCCTB. He made it very clear that Germany will intensify its efforts to restrict “unfair” tax competition, in particular by some of the new EU Member States.
Commissioner Kovács... emphasized once more that the Commission is determined to submit a legislative proposal (i.e. a draft directive) by the end of 2008. Should this proposal not find the necessary unanimous support from all 27 Member States the Commission will encourage a smaller group of 8 or more member states to introduce CCCTB by way of “enhanced cooperation."'

When could the introduction of CCCTB by enhanced cooperation come about? 2010.
'Kováks indicated that a new plan, scheduled to appear in mid-May at an EU conference on taxation in Berlin, would push towards the production of a harmonized common consolidated corporate tax base as early as next year. "If we manage to get a decision on enhanced cooperation, [another] two years would be enough for implementation. So it could start working in 2010," he said.'

Watch video of both Ms Lagarde and Commissioner Kovacs speak on this issue.
RTE Website on ccctb with explanation and videos of EU players:

France seeks to introduce common EU corporate tax plan

The French Government said on Monday April 7th 2008 (see The Irish Times) that while it holds the EU presidency from July onwards, it will push hard to encourage EU states to agree a common method of computing corporate taxes. It push forward the European Commission's plan to unify the rules by which Corporation Tax is calculated throughout the EU (the Common Consolidated Corporation Tax Base - CCCTB).

The French Finance Minister, Christine Lagarde on Monday said: "it's an issue that we are determined to push."
France are not alone because EU tax commissioner, Laszlo Kovacs as well as Commission President, José Manuel Barroso have been pressing for this for some time, making it a priority on the Commission's agenda after the summer recess, and after the vote on the Treaty of Lisbon.

EU leaders from 2001-2 on tax harmonisation

Roman Prodi - former EU Commission President


Many of the top figures in the EU have already called for tax harmonisation. By harmonise, of course, they mean making the taxes of other states such as Ireland, higher.
Here are few select examples:

The spectre of increased corporation tax was most famously raised by ex-German Finance Minister Oskar Lafontaine's proposal to "harmonise" taxes in Europe.
Mr Lafontaine is believed to have wanted minimum rates of corporation tax in all EU countries.
On Dec 1st 1998 he said "It is my personal view that we eventually must go to qualified majority voting on the sensitive issue of taxes."

Pressure from politicians in 2002 to increase Irish Rates of Tax,
ie. EU tax harmonisation.

Lionel Jospin, French Prime Minister: “I propose, in terms of corporate tax, that the tax bases should be harmonised and that a minimum rate should be fixed. This would be the first step towards a European tax…furthermore, I propose that, Internal Market should be made by QMV and not by unanimity. The same should be the case for social harmonisation” (Je m’engage, Jospin’s election manifesto, 22 March 2002).

Lionel Jospin, French Prime Minister on 28 May 2001, presented his vision of the future of the European Union. Included was the startling assertion (paraphrasing his words) that ‘ultimately, the corporate tax system as a whole will have to be harmonised across the EU to avoid tax dumping and the practice of certain Member States of using unfair tax competition whose only goal is to attract international investment and offshore headquarters of European groups’.
Informed EU-watchers are in no doubt whatsoever that many of these barbs by Mr Jospin were directed fairly and squarely at Ireland Inc. (taken from IBEC newsletter May 2001)

Jacques Chirac, French President: [we need], “genuine fiscal harmonisation in Europe…in an open, competitive Europe with a common currency, it is damaging for the French to always be taxed more than everyone else” (Le Monde, 7 March).

Gerhard Schroeder, German Chancellor: [we need], “the Europeanisation of everything to do with economic and financial policy” (The Times, 22 February).

Pascal Lamy, EU Trade Commissioner: “a natural first step would be to harmonise the tax bases and to adopt minimum tax rates but the ultimate goal should be the creation of a European Corporate income tax whose proceeds would either finance the EU or be allocated to Member States…to get there, we may need QMV on tax matters relating to the single market: controversial ..... perhaps, but a logical development” (FT, 8 March).

Laurent Fabius, French Finance Minister: In an article for Le Monde Mr Fabius argued that pooling fiscal policy “is a logical follow-up to the euro”. He said that mere co-ordination of tax and spending between euro member countries was insufficient. He called for “a real budget federation” for the Eurozone. He said the budget federation would “constitute a lever for growth and employment” (The Times, 1 January).

Romano Prodi, President of the European Commission: said of the launch of the euro, “I believe we have taken a major step that ineluctably leads to greater convergence of economic rules.” He said this gradual process “starts tomorrow” (Sunday Times, 30 December 2001).

Hans Eichel, German Finance Minister: “In the longer term I can imagine a Europe Tax. It strengthens spending discipline in Brussels if responsibility for expenditure and income is put together” (Daily Telegraph, 29 December 2001).

Hans Eichel, German Finance Minister: “The currency union [the euro] will fall apart if we don’t follow through with the consequences of such a union. I am convinced we will need a common tax system. (The Sunday Times 23/12/2001)

V. Giscard d’Estaing: “It is self-evident that once there is a single currency and free movement of capital and savings, the fiscal system will follow the same path..... But it is not competition that decides this. It is incumbent on governments to decide.” (The Sunday Times 23/12/2001)

The European Commission made first use of its powers to discipline a member state over its economic policy by recommending changes to Ireland's 2001 budget.
Pedro Solbes, the commissioner for economic and monetary affairs, said the action, marking the first ever move to enforce the EU's broad economic policy guidelines through peer group pressure under article 99 of the EU treaty, was "necessary to reinforce economic policy co-ordination among euro participants and underlined the Commission's central role in the co-ordination process". (Financial Times January 24th 2001)