Harmonisation of Corporate Tax in Europe
The Irish Crisis has triggered a debate on tax harmonisation between France and Germany. The French government is planning a major overhaul of the fiscal system in 2011 which will be prepared by a working group set up in the second week of December 2010. The French president Nicolas Sarkozy and other officials regularly praise the German tax system, which comes as a surprise to German officials who view their own system as extremely complicated and overdue for a fundamental reform.
Following a brief Franco-German dispute on fiscal and monetary priorities, Berlin managed to set the agenda, pushing for a harmonisation of corporate tax rates accross the EU. This is a field of fierce competition, notably from smaller member countries and especially from the crisis-shaken Ireland which is vigorously resisting pressure to raise its corporate tax from its current ultra-competitive level of 12.5%. As the French business daily « Les Echos » indicated, France and Germany want to create a similar base for corporate taxation in close cooperation with seven other member countries, including Italy, Spain and Sweden. This form of open cooperation is an achievement of the latest EU treaty reform. It is intended to pull other countries along into closer integration of policies, once the frontrunners have set up a project that works. Germany is believed to favour setting the entry level at 20%. Currently, corporate taxation in Germany varies, as it incorporates regional taxes, around 30%.
French industry is very much in favour of fiscal harmonisation, starting with corporate tax rates. The procedure will not be quick, however. Both countries have begun analysing their own system, trying to identify those taxes that can be easily modified and harmonised. The working agenda will be set in January 2011 during a meeting in Paris of the two corresponding government bodies. According to reports from Berlin, the conclusions are to be expected in late Spring.
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