Thursday 12 May 2011

The Tory EU dilemma...

It’s true that normally the words “interesting” and “European tax regulation” don’t go.

But last night there was a telling Commons exchange over EU Commission plans to set up a Common Consolidated Corporate Tax Base (CCCTB) – honestly, don’t stop reading, it gets better.

At the moment companies operating in different EU member states use different calculations to work out their taxable profit.

So the EU wants to set up a CCCTB which would see all member states complying with one EU-wide system - the advantage being that a company working across the EU would not have to carry out 27 different calculations to work out their taxable profit in each state.

The actual tax rate would still be up to the member state to set, but the way taxable profits were determined would be uniform.

Predictably the Tory right have stomach pains at the mere thought of it – as Amber Valley MP Nigel Mills put it “this whole thing has to be seen as a drive towards a single European Union, a single federal state”.

But the Government is having difficulties defining its position. It claims it doesn’t want anything that diminishes the UK’s power to determine its own tax policy.

It is a statement of position which has led Tory Eurosceptics to ask the Government why it doesn’t just veto the proposal and say no to the whole thing.

But ministers aren’t willing to do that, pointing out that the UK should be involved in negotiations on a plan other states might adopt, even if they don't, because it still might affect the UK indirectly.

Some might say the Government is taking this stance because they're purposefully trying to debunk the CCCTB, and the EU, from the inside – an argument put beautifully by Sir Humphrey Appleby in this video.

But I’d suggest it actually indicates the fundamental difficulty and contradiction in Government, particularly Conservative, EU policy.

They don’t want CCCTB to happen, but they can’t bear to be outside the negotiations just in case something happens without them that might affect them, that might tie them in even closer.

In other words they have to be in, because they want to be out.

Attempting to stir a Coalition split, Shadow Treasury Minister Chris Leslie suggested last night that it was the Lib Dems that was stopping the Tories from vetoing CCCTB outright.

But I suspect the bigger coalition partner would have the same problem were it in government alone.


IanVisits said...

We already have international agreements on how to calculate a company profit statement - IFRS and GAAP - so it makes sense that some standardisation is made along the same principles for taxation.

Although some will see this as an EU plot, frankly, it sounds like the sort of international tidying up of accountancy that would happen even if the EU didn't exist.

john in cheshire said...

If we were out then we wouldn't have to be in to be out.

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