BERLIN (Reuters) – Germany and France have agreed some pot proposal for corporate tax harmonization among EU member states to fight tax avoidance and level the field for businesses operating from the bloc, the German Finance Ministry said on Wednesday.
Finance Minister Olaf Scholz and French counterpart Bruno Le Maire nailed down a great deal that is definitely directed at facilitate discussions for some other member states and enable the swift adoption on the European Union directive, the ministry said.
"Europe wants a common framework in tax policy. This is actually the only way to avoid unfair tax practices plus a harmful tax race towards bottom, also to create transparent and fair conditions of competition for European companies," a ministry statement said.
The German-French position paper demonstrates that the ecu Commission's proposal for any Common Corporate Tax Base (CCTB) should cover all corporate taxpayers.
"France and Germany therefore take into account that it becomes appropriate to give the scope on the CCTB Directive to restore compulsory for everyone companies subject to corporate tax, irrespective of their legal form or their seize," it read.
The tax base must be determined by accounting principles and calculated by making use of the organization asset comparison method so as to contain a classy and comparable method and get away from as often bureaucracy as it can be, it said.
The Commission's proposal is a second attempt at introducing a typical tax base along the EU, and the Franco-German initiative may well meet resistance off their member states for instance Ireland and Luxembourg.
Brussels proposed a voluntary common consolidated corporate tax base (CCCTB) last year, however it bumped into opposition back then from countries like Britain and Ireland, who saw it like a forerunner with a common corporate tax rate.
NO TAX INCENTIVES
The finance ministers of Germany and France, the euro zone's two biggest economies, also agreed that any harmonized corporate tax base must not feature any tax incentives.
"Thus France and Germany are not in support of provisions regarding tax incentives for research and development and equity financing," the position paper said.
Both countries are against introducing provisions on cross-border loss relief because they ought to be discussed for a second stage. They suggest a transitional amount of at least four years because of the technical complexity on the issue.
A German finance ministry spokeswoman said it was too soon to evaluate if the proposed changes would bring on roughly tax revenues.
The position paper suggested neither some level nor a corridor for the EU-harmonized corporate tax rate.
The BDI industry association called on Wednesday within the German government to minimize the actual tax burden for businesses to below 25 percent from currently around Thirty percent.
BDI Md Joachim Lang pointed to increased tax competition from abroad because United states of america slashed its corporate tax rate to 20 percent from 35 % during the past year, the biggest overhaul of U.S. tax laws since the 1980s.
Ireland's low 12.Five percent corporate tax rate has long managed to make it a hub for investment by major multinational employers like Google (O:GOOGL) and Facebook (O:FB), and tax receipts for your sector have doubled to record levels over the last five-years.
Concerning revenues and expenses, France and Germany propose the deduction of the taxes and duties aside from corporate tax and similar taxes on profits. But both consider that special purpose levies just like bank levies really should not be deductible.
The tax exemption of distributions and capital gains must provide for just a flat-rate deduction of non-deductible operating expenses representing 5 percent in the exempt income.
"It may be also useful to find the affect on investment capital and start-ups," the paper said.
France and Germany would also like the CCTB directive to add a meaning of hidden profit distributions to capture instances where a person has waived appropriate payment for products and services, and gives with regards to inclusion during the tax base.
On tax losses, both countries suggest there has to be the absolute minimum taxation of profits whereby loss carry-forwards are restricted towards a number, between 50 and 60 percent, within the taxable profit after deduction of just one mln euros. A one-year loss carry-back all the way to 1 mln euros needs to be allowed.