France and Germany behind plans for ‘common EU corporation tax’

France and Germany want to see common basic corporation tax rates across the EU, according to reports

France and Germany are pushing plans to introduce a minimum corporation tax rate across the continent, it was reported today, in a move that could result in higher taxes on British companies.

European officials will debate plans to set a EU-wide floor on corporation tax in order to crack down on tax havens such as Ireland and Luxembourg, it emerged.

The plans are a direct challenge to David Cameron, who is calling for sovereignty to be returned to EU members.

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Britain is prepared to veto any proposals that see it surrendering power over tax rates to Brussels.

“We have a long-standing view on tax harmonisation, which is not to support it,” said a Downing Street spokesman.

However, campaigners said it showed the scale of the challenge David Cameron faces in renegotiating Britain’s membership.

“It is a direction of travel issue,” said Robert Oxley, of campaign group Business for Britain. “It shows the EU thinks corporation tax is an area of common concern, suggesting there are those at the heart of the Eurozone who want more power over Britain, not less.”

On Wednesday, EU officials are scheduled to discuss how to tackle tax avoidance and create a system of “fair, transparent and growth friendly” corporation taxation at an orientation debate in the College of Commissioners, a forum used to float ideas.

The discussion will “feed into” an announcement on corporation tax in June.

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The discussion will include plans to create a basic rate of corporation tax across Europe, reported Handelsblatt, the German business newspaper.

“Germany and France and demanding a minimum threshold value; we are reacting to that,” one commission source told the newspaper.

At 20 per cent, Britain has the lowest corporation tax rate in the G7, and among the lowest in western Europe.

Any measure to harmonise corporation taxes would likely hit Ireland, the base of many international tech companies, with a 12.5 per cent rate.

The European operations of Apple, Google, and Facebook are all headquartered in the Republic. American Internet companies have become a target in Brussels on an array of issues including privacy and competition, as well as taxation.

Luxembourg meanwhile has a special 5.7 per cent rate on intellectual property income and royalties. The Netherlands and Belgium have brokered special deals to woo overseas investors.

The beneficiaries would likely be France, with a 33 per cent basic rate and 36.6 per cent higher rate; Germany, with a rate of between 30-33 per cent; and Spain, with a rate of 30 per cent.

A spokesman for the European Commission said: “The Commission has no plans to propose a minimum rate of tax for businesses in the EU.

“More broadly, we do however want to ensure that profits in the EU are taxed where the value is generated. The June Action Plan will set out concrete steps that could be taken towards achieving this goal.”

France and Germany have called for harmonisation of corporation tax for several years. In 2011 Angela Merkel and Nicolas Sarkozy aimed to introduce a “competitiveness pact” among the 17 countries of the eurozone, including a more standardised corporation tax rate, drawing opposition from Ireland.

Mr Cameron last night met Jean Claude Juncker, the president of the European Commission, for dinner at Chequers where he outlined his negotiation plans and said that the “British people are not happy with the status quo” in Europe.

He will embark on a tour of Europe meeting his counterparts in Germany, France, Denmark, the Netherlands and Poland later this week.

Downing Street insists that Mr Cameron wants treaty change in Europe. However, Mr Cameron’s spokesman left the door open to an in-out referendum being held before any new treaty has been ratified – a process that could require referendums across Europe.

One potential option would be for Britain’s new deal to be enshrined in a protocol that is then written into a new treaty later in the decade.

“It will be very clear to the British people what they are voting on,” Mr Cameron’s spokesman said.

Liam Fox, the former defence secretary, said Mr Cameron should go for a long renegotiation and said his counterparts calling for an early vote have “ulterior motives which are not entirely honourable”.

Dr Fox said: “I think they want to see a decision made quickly, to limit the level of debate in the UK. I think that they are afraid that if we have a very full debate then some of the real unacceptable issues in Europe at the present time will become all the more clearly seen by the British public.”