Business representative group Ibec said it is opposed to the introduction of pan-European rules on the taxation of business profits.
The new legislation on corporation tax will form part of a drive by the EU executive to revitalise the union’s internal market.
“The commission will take steps to improve the co-ordination of national tax policies, notably by proposing a directive introducing the common consolidated corporate tax base,” a draft of an imminent communique from the EU executive says.
The Government has long argued this would undermine tax competition in Europe, dimming the lustre of its own 12.5 per cent corporation tax rate.
Speaking today Minister for Enterprise, Trade, and Employment Batt O'Keeffe said the 12.5 per cent corporate tax is "a constant".
"We've inserted into the treaty a legal guarantee that it will not be changed, and as far as Ireland is concerned we need to send a message out and give clarity that Ireland's corporate tax of 12.5 per cent is not going to be changed," the Minister said on News at One.
Asked if he could be certain of this, Mr O'Keeffe said it was significant that more than 12 nations had expressed concerns over the discussion document and noted that unless there was unanimity on the issue there would be no change.
The policy would not harmonise corporate tax rates. Instead it would introduce a common European formula for the calculation of tax on the profits of firms operating in more than one member state.
Ibec said such a move would do nothing to improve the EU competitiveness and could damage the economies of smaller member states, such as Ireland.
Director general Danny McCoy said the move would most likely result in lower revenue from corporation profits in smaller countries.
“In the case of Ireland, which exports the greater part of its output to the larger central economies of the EU, companies would see part of their profits, apportioned to other higher-taxed member states such as Germany or France,” Mr McCoy said.
Chartered Accountants Ireland adopted a different stance and said the plans would “focus on how much of a company's income should be taxed, not at what rate of tax”.
It said the proposals do not mean that Ireland’s 12.5 per cent rate of tax is going to be challenged. The accounts’ body is not in favour of a common European approach to corporation tax.
The proposal raises the prospect of the Government being forced into a battle with the commission and powerful states such as France at a time when it needs the goodwill of the EU authorities to help weather the economic crisis.
One of the main arguments against a consolidated tax base is that it would reallocate tax receipts to countries in which revenues are received. This would lessen scope to maximise the profits that companies record in Ireland.
EU tax commissioner Algirdas Semeta will introduce legislative proposals early next year. He plans to brief Minister for Finance Brian Lenihan on the proposal on Monday week.
The plan was first aired in 2001. Agreement proved elusive and it was withdrawn in mid-2008 in the wake of Ireland’s rejection of the Lisbon Treaty. Now, however, the commission believes the conditions are ripe for its reintroduction.
Changes to European tax policy must be unanimously endorsed by member states before they take effect so the Government could veto the plan.
This raises the prospect of the Government being forced into a battle with the commission and powerful states such as France at a time when it needs the goodwill of the EU authorities to help weather the economic crisis.