New EU proposals to harmonize corporation tax rules would hamper healthy tax competition between member states, the IoD warned today. The European Commission’s “fair tax action plan”, published today, also risks blurring the line between legitimate tax planning and abusive tax avoidance.
Responding to the publication of the action plan, Stephen Herring, Head of Taxation at the Institute of Directors, said:
“The attempt to relaunch the stalled Common Consolidated Corporate Tax Base (CCCTB) project smacks of unhelpful political populism. Each European government faces different economic pressures and corporate tax is an important tool in helping them adjust to changing circumstances. The EU should not be trying to impose a straightjacket on its members, particularly as it will almost certainly increase the level of tax for business.
“Trying to redistribute tax revenues between countries under a CCCTB would be incredibly bureaucratic, and fraught with uncertainty as countries squabble between themselves over how to share the money. The Commission is trying to defuse criticism by breaking up the process into two parts but this will not resolve the serious flaws with the proposals.
“While IoD members have never supported abusive tax avoidance, the proposals in this area risk damaging Europe as a destination for global inward investment. Brussels is trying to push ahead with action on companies perceived to be shifting profits between countries, without waiting for the outcome of the major international investigation that is currently being led by the OECD.
“On tax transparency, we are pleased to see that the Commission is at least planning to consult with stakeholders first before any sudden move to require mandatory public disclosure from all companies. However, it was worrying to see Commissioner Moscovici pronounce his personal preference to require expensive public country-by-country reporting when announcing the consultation.