LFMI’s study “Harmonisation of The Corporate Tax Base in the European Union”

On 11 April 2006, the Lithuanian Free Market Institute initiated a petition against the efforts of the European Commission to create a Common Consolidated Corporate Tax Base (CCCTB), which was signed and disseminated by 30 European economic research institutes and individuals (the list is below). The Petition was submitted to the European Commission, the European Parliament and the Council of Europe as well as national governments and mass media of the member states.

The Petition came as a reaction to the Commission’s communicate on the progress made and the next steps proposed to be made towards creating the CCCTB. Twenty-three European free-market oriented think tanks have undersigned the petition urging all EU member states to oppose this harmful initiative of setting uniform corporate tax rules across the EU as it would undermine the euro zone’s competitiveness in the global economy, pose enormous tax-compliance costs for all businesses without exception and in general fail to achieve the goals envisaged for tax harmonisation.

Below is the full text of the Petition.

Petition

Against the efforts of the European Commission to create
a Common Consolidated Corporate Tax Base (CCCTB)

On 4 April 2006, the European Commission issued a Communication to the Council, the European Parliament and the European Economic and Social Committee on Implementing the Community Lisbon Programme on the “Progress to date and next steps towards a Common Consolidated Corporate Tax Base (CCCTB).” The Communication has a dual purpose “of reporting on progress to date and of drawing attention to those areas where further political support and direction is desirable without seeking commitments from Member States to the legislative proposal.”

The Communication asks for political support and direction from Member States for: involvement of Member States and the Commission in further development of the CCCTB without making premature or final commitment to the CCCTB; readiness of all Member States to make changes in their tax regulations; establishment of no formal link between the CCCTB and corresponding international accounting standards; and introduction of the CCCTB as an option for companies.

The signatories, as independent European economic research institutes who share the ideal of an open economy based on a freely functioning market for the European Union and Europe as a whole, are deeply concerned with the efforts to promote tax harmonization in general and challenge the idea of the CCCTB due to the these reasons:

– the CCCTB will not help to achieve the aimed-at objectives of ensuring a smooth functioning of the common market, reducing the administrative burden or building transparency of tax rules;

– the CCCTB will serve, and is already serving, as the first step towards a uniform tax policy in the European Union, which will undermine tax competition inside the European Union and weaken the region’s competitiveness in the global economy;

-the CCCTB will render the corporate tax base even more complicated and, possibly, even more distinct from the international accounting standards, while, if being optional, it would only increase the number of standards within the EU;

– the CCCTB will create enormous tax-compliance costs to business, especially small- and medium-sized enterprises.

Given that the benefits of the CCCTB are questionable and the shortcomings are obvious, the signatories call on the European community to undertake the following action:

1. EU member states should oppose the initiative towards the harmonisation of the corporate tax base and further moves aimed at creating a tax cartel among EU member states.

2. High-tax EU member states advocating tax harmonisation should move their own tax systems closer to those competitive tax regimes that bolster economic growth.

3. The business community should bear in mind that harmonisation of the corporate tax base would not tackle, and would not even build preconditions to tackle, the defects of corporate taxes existing in national laws (which abound in all member states), but would inflict new administrative costs instead. Therefore, the business community should not endorse the idea of harmonising the corporate tax base, but should use this opportunity to call on their national governments to eradicate the deficiencies of national corporate taxes. The business community should also announce publicly its position on the harmonisation of the corporate tax base.

First signatories:

Dr. Remigijus Šimašius – Lithuanian Free Market Institute, Vice-President, Lithuania
Barbara Kolm-Lamprechter – Hayek Institute, Secretary General, Austria
Alberto Mingardi – Istituto Bruno Leoni, Director, Italy
Pierre Bessard – Institut Constant de Rebecque, executive Director, Switzerland
Johnny Munkhammar – Timbro, Programme Director, Sweeden
Matthew Elliott – The TaxPayers’ Alliance, Chief Executive, United Kingdom
Krassen Stanchev – The Institute for Market Economics, Executive Director, Bulgaria
Chresten Anderson – Copenhagen Institute, Director, Denmark
Peter Gonda – Conservative Institute of M.R. Stefanik, Economic Analyst, Slovakia
Dr. Tomasz Zylicz – Warsaw University Faculty of Economics, Dean, Poland
Dr. Oliver Knipping – The Institute for Free Enterprise, President, Germany
Neil O’Brien – Open Europe, Director, United Kingdom
Dr. Detmar Doering – Liberales Institut der Friedrich-Naumann-Stiftung, Director, Germany
Rahim Taghizadegan – Liberty ideas, President, Austria
Cecile Philippe – Institut Economique Molinari, Director General, Belgium
Andrzej Sadowski – The Adam Smith Research Centre Warsaw, Vice-President, Poland
Dr. Andrzej Kondratowicz – R. Kudlinski OLYMPUS University, Deputy Rector, Poland
Gorka Echevarría – The Instituto Juan de Mariana, Fiscal Policy Director, Spain
Javier Alonso Gutiérrez – Asociación Madrileña de Consumidores y Contribuyentes, President, Spain
Jiri Schwarz Jr. – Liberalni institut, Head of the Center for economic freedom, Czech Republic
Pierre Garello – IES-Europe, Director, France
Jean-Philippe Delsol – IREF, Director, Luxembourg
Martin Chren – the F. A. Hayek Foundation Bratislava, Director, Slovakia

Second signatories:

Waldemar Ingdahl – The Eudoxa think tank, Director, Sweden
Christian Watrin – The University of Cologne, Professor of Economics, Germany
Miroslav Prokopijevic – Free market center, President, Serbia
Jean-Thomas Lesueur – Institut Thomas More, In charge of Studies and Publications, Belgium
Ph.D Richard Durana – Institute of Economic and Social Studies, Director, Slovakia

Individuals:

dr. Steve Pejovich
Ramūnas Garbaravičius