BRUSSELS: Europe launched plans on Wednesday to give multi-national companies the choice of filing corporate tax returns just once, but a simmering row over Ireland's business tax rates left their sponsor on the back foot.
EU taxation commissioner Algirdas Semeta's legislative proposals, part of a drive to deepen the European Union's single market of half a billion consumers, came up against bailed out Ireland's battle with Germany, France and others who want to wipe out Dublin's low rate advantage.
The major EU powers refused at a eurozone summit on Friday to lower the interest rate on Ireland's 67.5 billion euro ($94 billion) international bailout without concessions from Dublin on the tax question.
While France and Germany support Semeta's new scheme, Dublin dismisses the idea out of hand.
After sparks flew as new Irish premier Enda Kenny clashed with French President Nicolas Sarkozy, the issue is sure to re-surface at a full EU summit next week.
"I will not compromise," Kenny told the Dublin parliament late on Tuesday.
Semeta wants the bloc's 20 million companies to be free to apply a Common Consolidated Corporate Tax Base (CCCTB).
Denying it was "even a first step" towards harmonising EU taxation a core power jealously guarded by states, he said compliance costs for business "when starting cross border activity" could fall by "two thirds."
Employers federation BusinessEurope said support was possible but only if four conditions were met.
Companies must be free to opt in or out, the legislation should "allow for the consolidation of profits and losses from the start" compliance costs should fall, and decisions on tax rates must be left to national governments.
The Lithuanian commissioner admitted it may be impossible to convince Ireland and other doubters, but said his plans would show up "real effective rates" of taxation for companies across the EU.
"If the Irish tax system is so beneficial to company maybe they will remain with the Irish tax system," Semeta underlined.
Acknowledging that getting all 27 EU states to sign up to his plan would be near impossible, Sementa indicated that he could settle for it toapply to just a small group of nations under an EU rule allowing nine or more countries to band together on a law.
Decisions on tax must be unanimously approved by EU nations.
Ireland's 12.5-percent corporation tax rate helped to fuel growth in what was once known as the Celtic Tiger economy.
The government there cites attractiveness to foreign investment and job creating industry that generates exports and economic growth.
However, EU rivals accuse Ireland of gaining an unfair advantage and argue that Dublin is losing out on revenue streams that could ease its debt and deficit problems.
EU economic affairs Chief Olli Rehn said Dublin should be "constructive," while German Finance Minister Wolfgang Schaeuble said US Treasury Secretary Timothy Geithner had told him of frustration in Washington at the volume of American business activity that takes advantage of the Irish tax regime.
Figures from PricewaterhouseCoopers in London in its 2011 Paying Tax survey underline the problem with transparency.
Produced with the World Bank, they bring together taxes on profit, labour, property and other lesser or hidden levies and calculate that total tax paid by firms in Ireland would be 26.5 percent.
In France, companies would pay 65.8 percent, the bulk of it on labour, and in the United States, 46.8 percent.
"The tax base has to be adjusted for local conditions and deductions taken into account," report co-author Susan Symons told AFP. "That's what the EU is tryied to harmonise."
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