Single corporation tax rate for Europe?

France will press for a single corporation tax rate across the European Union when it assumes the EU presidency in the second half of this year. Christine Lagarde, the country's finance minister, said: 'It's an issue that we are determined to push.'

Officials at the European Commission (EC) are thought to be sympathetic to France's proposal. Officially, the EC supports competitive tax rates where the impact is positive: opposing it where it is harmful. Europe's commissioner for tax, Laszlo Kovacs, is currently focusing on creating a unified system to calculate corporation tax, while member states continue using their own tax rates.

Speaking at this year's Brussels Tax Forum, Kovacs said he hoped to propose common rules for computing corporation taxes in the autumn. 'We are aware that there are significantly higher tax compliance costs and administrative burdens for companies operating across the internal borders in the EU, than for those acting only within one member state,' said Kovacs.

'At present, EU enterprises have to deal with 27 different systems to compute their taxable base, which creates many problems related, for example, to transfer prices or cross-border loss recovery,' explained Kovacs. 'The smooth functioning of the European Single Market is impeded by tax obstacles such as double taxation, high compliance costs, tax costs involved in business restructuring and, in general, tax measures which induce firms to invest and operate domestically rather than in another EU member state.' Kovacs stressed that harmonisation of corporation tax rates would only happen if there was a 'unanimous will' for it. 'Tax rates... are normally best decided in the 27 capitals,' he said. But there needs to be greater cooperation by member states in acting together on tax policy, he argued - for example, in agreeing a harmonised system for VAT reduced rates.

France's proposal for an EU-wide single corporation tax rate has provoked anger in Ireland, where the rate is 12.5%, compared to France's 33%. The Irish government believes that much of its recent economic success was generated by its low rate of tax. It also worries that the debate makes a yes vote less likely in the forthcoming referendum on the Lisbon treaty. Ireland is the only member state obliged to gain approval from its voters before it can sign a European treaty.