Post EC attempts to harmonise tax

10 March 2011
Author: Leigh Jackson

The European Council’s proposals to standardise taxes across member states could mean fewer insurance companies look to redomicile to countries such as Ireland.

In December 2010, the European Parliament narrowly rejected an amendment calling for tax harmonisation in the European Union.

But, this week, EU Council president Herman Van Rompuy will present a new pact requiring compliance with deficit limits, including provisions for a common consolidated corporation tax base.

This will require countries to re-distribute revenues earned within their territories by international companies, meaning that Ireland-based global insurers and brokers could be exposed to higher taxes from across Europe.

The council is also calling for a shift of taxation away from corporation tax, towards indirect taxes such as VAT.

Richard Asquith, head of VAT at TMF Group, told Post the initiative is driven by last year's Euro crisis, which exposed the currency to turbulence - in part due to fiscal imbalances.

"It is being seen as an attempt to curb low-tax countries, such as Ireland, which have attracted major insurance sector investment from the rest of Europe; and potentially increase insurance premium tax and VAT to help Europe retain global employers," he said.

He added: "Germany in particular is seen as wishing to draw concessions on tax competition. It is angered by the loss of jobs, in insurance and other sectors, and will want to impose fiscal freedom restrictions."

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