* Aim to level playing field for firms across euro zone
* Initiative may be resisted by some other member states
BERLIN, June 20 (Reuters) - Germany and France have agreed a joint proposal for corporate tax harmonisation among EU member states to raise transparency and level the playing field for companies doing business in the bloc, the German Finance Ministry said on Wednesday.
Finance Minister Olaf Scholz and French counterpart Bruno Le Maire nailed down a deal that is meant to facilitate discussions with other member states and enable the swift adoption of a European Union directive, the ministry said.
“Europe needs a common framework in tax policy. This is the only way to prevent unfair tax practices and a harmful tax race to the bottom, and to create transparent and fair conditions of competition for European companies,” a ministry statement said.
The German-French position paper suggests that the European Commission’s proposal for the Common Corporate Tax Base (CCTB) should apply to all corporate taxpayers.
“France and Germany therefore consider that it would be appropriate to extend the scope of the CCTB Directive to make it compulsory for all companies subject to corporate tax, irrespective of their legal form or their seize,” it read.
The tax base should be determined on the basis of accounting principles and calculated by applying the business asset comparison method so as to have a simple and comparable method and avoid as much bureaucracy as possible, it said.
The Commission’s proposal is the second attempt at introducing a common tax base across the EU, and the Franco-German initiative is likely to meet resistance from other member states such as Ireland and Luxembourg.
Brussels proposed a voluntary common consolidated corporate tax base (CCCTB) in 2011, but it ran into opposition back then from countries like Britain and Ireland, who saw it as a forerunner to a common corporate tax rate.
The finance ministers of Germany and France, the euro zone’s two biggest economies, also agreed that a harmonised corporate tax base should not feature any tax incentives.
“Thus France and Germany are not in favour of provisions regarding tax incentives for research and development and equity financing,” the position paper said.
Both countries are against introducing provisions on cross-border loss relief as they should be discussed at a second stage. They suggest a transitional period of at least four years due to the technical complexity of the issue.
Concerning revenues and expenses, France and Germany propose the deduction of all taxes and duties other than corporate tax and similar taxes on profits. But both consider that special purpose levies such as bank levies should not be deductible.
The tax exemption of distributions and capital gains should provide for a flat-rate deduction of non-deductible operating expenses representing five percent of the exempt income.
“It could also be helpful to consider the impact on venture capital and start-ups,” the paper said.
France and Germany also want the CCTB directive to include a definition of hidden profit distributions to capture cases where a taxpayer has waived appropriate payment for goods and services, and provide for their inclusion in the tax base.
On tax losses, both countries suggest there should be a minimum taxation of profits whereby loss carry-forwards are limited to a certain percentage, between 50 and 60 percent, of the taxable profit after deduction of 1 mln euros. A one-year loss carry-back of up to 1 mln euros should also be allowed. (Reporting by Michael Nienaber Editing by Mark Heinrich)