The unprecedented attack this week on the Irish corporate tax regime by German finance minister and current president of the EU Ecofin Council, Peer Steinbrück demonstrates most clearly, what may lie behind the drive to introduce a Common Consolidated Corporate Tax Base in the EU. If successful, it would have an extremely adverse impact on businesses operating not only in Ireland, but also in other member states.

By the end of next year, EU tax commissioner Lázsló Kovács intends to bring a draft legislative proposal to introduce a common corporate tax base. The Commission says that a common tax base would provide companies with a physical presence in at least two Member States compute their group taxable income according to one set of rules.

It contends this would reduce compliance costs, tackle most of the tax obstacles hindering the development of EU-wide activities such as transfer-pricing rules and lack of cross-border loss compensation and would remove the risk that the European Court of Justice may rule certain practices unlawful.

As a result, it claims that a common tax base could make a significant contribution to the success of the internal market, improved growth and employment and to the enhanced competitiveness of EU business.

Businesses in Europe have expressed surprisingly little alarm not to mention scepticism at these untested assertions.

However, the main impact goes far beyond administration costs. A consolidated tax base across Europe requires a method of artificially apportioning profits to various jurisdictions with widely differing tax rates. This will produce winners and losers both at a corporate and member state level.

What is emerging as a likely formula will involve a heavy weighting being given to sales by destination. If this is so, many companies operating in Ireland will face higher corporate tax bills under a common corporate tax base, as a proportion of profits currently taxed at 12.5 per cent would have part of their profits apportioned to the larger consuming member states to be taxed at higher rates.

Other peripheral member states supplying the larger EU markets are likely to suffer a similar impact, which could become a factor in discouraging foreign direct investment in the EU.

This will also result in a loss of tax revenue to the Irish exchequer and a gain to larger consuming countries - effectively a transfer of resources from Ireland to the larger economies.

The commission suggests that losers could make good their revenue losses by increasing their tax rates. Either way, companies' total tax bills will be higher and the Irish exchequer could be forced into raising offsetting taxes - which would come close to an attack on our sovereignty.

The commission has mollified potential business objections by saying that companies would have the option of choosing either the new common tax base or remaining with existing regimes. In that sense companies appear to have little to lose.

But for how long could a common tax base remain optional? If simplicity and a reduction in administration costs are part of the raison d'être for a common base, running an additional system side by side with national tax regimes makes no sense.

Already, communications from the commission lend credence to the view that any opt-out would be a temporary measure. Companies value certainty and continuity above all in their dealings with tax authorities. The commission's proposal is a major alteration to the tax system with unknown consequences.

Corporations that have legitimately located in member states with a more favourable business climate will face a deterioration in their operating conditions and profitability. This will hardly enhance their global competitiveness and could result in some foreign direct investment locating in more favourable tax regimes outside the EU.

The claimed administrative gains are overstated. The necessity to develop a new set of rules and definitions will add to the administrative complexity and judicial appeals on apportionment disputes could be rife.

Competitive economies need to be flexible and adapt rules of tax computation to the changing requirements of new products and services. What chance would there be to bring in urgent tax changes or incentives for innovation, for example, if we had the juggernaut of one tax base throughout the union, requiring the agreement of all member states to change it?

Member states should retain control of their fiscal policy and adapt it to country specific needs.

A further concern is whether this is a first step towards tax rate harmonisation. The commission has a long history of pushing for harmonised tax rates - and a common tax base is a prerequisite to tax rate harmonisation. Ibec believes that tax competition is the best way of ensuring low taxation, which is an essential element in the competitiveness of the EU.

Member states must maintain their sovereignty over tax issues and retain their ability to adopt taxation policies suitable to their needs.

Turlough O'Sullivan is director general of Ibec