COMMUNITY LISBON PROGRAMME: GROWTH AND
EMPLOYMENT (11618/05)
Letter from Rt Hon Dawn Primarolo MP,
Paymaster General, HM Treasury to the Chairman
I am writing in response to your comments on
the Commission's work on a common Consolidated Corporate Tax Base
in your letter of 14 November 2005[4]
to John Healey.
You refer, in particular, to the Financial
Times report of 25 October 2005, which gave the impression
that the Commission might have in mind "a non-binding voluntary
instrument", and say that you are interested in how this
might affect UK companies' competitiveness compared to their EU
counterparts.
You will since also, of course, have seen my
Explanatory Memorandum of 21 November 2005 (EM 14042/05) on the
Commission's Communication on "The Contribution of Taxation
and Customs Policies to the Lisbon Strategy" (COM (2005)
532 final) which also touched on the Commission's intentions in
this area.
In autumn 2004, the European Commission established
a new technical working group, the Common Consolidated Corporate
Tax Base Working Group (CCCTB WG) initially for a period of three
years. The group's work is being taken forward without political
commitments from Member States. The CCCTB WG has met on five occasions
to date and the Commission's work on this complex, technical exercise
is still at an early stage.
The UK Government remains clear that fair tax
competition, not tax harmonisation, is the way forward for Europe.
Moreover we consider that it is essential for discussions on corporate
tax to be set in a global, and not just an EU, context. So we
do not see need for the Commission's technical work in this area.
UK officials are nevertheless participating in the technical work
on a strictly without prejudice basis. We will continue to make
clear that we are sceptical about both the principles and the
practicalities of the Commission's ideas in this area and to argue
for a change in approach.
In its recent Communication (COM (2005) 532),
the Commission admitted that the technical work on a CCCTB was
a "challenging exercise" but nonetheless reiterated
its intention to present a Community legislative measure on a
CCCTB by 2008.
The reference in the FT article of 25 October,
however, is to the possible use at some point of the Treaty provisions
on enhanced co-operation, on which the two recent Commission Communications
(COM (2005) 330 and 532) are silent but which was referred to
briefly in the Commission's 2003 and 2001 company tax Communications
(COM (2003) 726 and COM (2001) 582). As set out in the Treaty,
an initiative for enhanced co-operation may only be launched as
a "last resort when it has been established within the Council
that the objectives of such co-operation cannot be attained within
a reasonable period of time by applying the relevant provisions
of the Treaties." Enhanced co-operation is also only permissible
if a number of conditions are met. Inter alia, it must
not undermine the internal market nor constitute a barrier to
trade or distort competition between Member States, and it must
respect the competences, rights and obligations of non-participants.
In a global economy, the UK does not believe
that the competitiveness of the EU would be helped by a harmonised
company tax base. However, provided the process in the Treaty
was followed, the use of the enhanced co-operation provisions
would be a matter for those Member States that wished at some
point to be involved. Member States participating in such a CCCTB
would of course no longer have the same freedom to adjust corporate
tax provisions in the light of national circumstances, including
businesses' needs, and in the face of global pressures and developments.
The UK will not contemplate any action at European
level that could threaten jobs and the competitive position of
UK business.
12 January 2006
4 Correspondence with Ministers, 45th Report of Session
2005-06, HL Paper 243, pp 59-60. Back
| 
