Several EU countries will adopt a joint method of taxing profits if support for bloc-wide harmonisation still proves elusive by the end of 2007, the European Commission said today.
The Commission wants firms operating across borders to be able to file tax returns based on a single system to save the cost of complying with different national regimes.
A common tax base would allow a company to offset losses in one member state against profits made in another - a principle the European Court of Justice backed last year in a case brought by British retailer Marks & Spencer.
Revenue would be shared among member states according to how much of a company's business was conducted on their turf, and EU Tax Commissioner Laszlo Kovacs wants to table a formal proposal by the end of 2008.
Britain and Ireland are opposed, fearing it will lead to harmonised corporate tax rates, a view Mr Kovacs denied at a news briefing today.
Tax changes need the support of all the bloc's 25 members, though a third or more states could introduce a common base in their own countries under the EU's enhanced cooperation rules.
"If by the end of 2007 we will clearly see no unanimous agreement in support of a common tax base, then we can start to elaborate the enhanced cooperation, and it needs only qualified majority and I do hope it will be provided," Kovacs said.
"For the time being, we try to take all the member states on board ... The ball is rolling on," Mr Kovacs said.
He said 12 states and business groups were firm supporters and 10 states were hesitating, with Britain and Ireland opposed.
Mr Kovacs said a common tax base would be optional, but this did not rule out the system becoming mandatory later. EU finance ministers are to discuss the topic informally at the weekend and reach a view in June.
The EU's internal market commissioner, Charlie McCreevy, publicly opposes his colleague's tax plan, but Mr Kovacs said the Commission overall was broadly in favour.
Technical work will continue, but some member state officials were avoiding tricky issues while others wanted to keep their national system alongside a common tax base, Mr Kovacs said.
Mr Kovacs said a common system should not be directly based on International Accounting Standards, the rules all the EU's 8,000 listed firms must use, as IAS standards changed frequently.