The agreement reached yesterday during the Franco-German summit held in Paris will levy a tax on public limited companies within both countries as soon as 2013. This measure will have economic consequences on other Eurozone countries as well, Spain included.
Both governments hope that the tax will foster progressive fiscal union for companies within their borders and that it would serve as a model for a taxable income regulations for others. In other words, that it would clarify what profits companies are responsible for paying taxes on.
If the taxable income idea is adopted, the biggest doubt centers around what profits would still be able to take advantage of various incentives and exemptions, considering that for the most part that depends on the tax burden that the companies could support.
The other parameter that determines if companies pay the government a little or a lot is what tax bracket is assigned in the new tax regulation. In Spain, taxes are currently around 30%, which is an average level for the EU and similar to what is used in France and Germany.
Granted the details of the Franco-German agreement are still unknown, experts are starting to indicate that the measure to achieve fiscal union in Europe would certainly put Spain?s best interests at risk.
In the first place, the corporate tax rate norm, something in which is already at work in the heart of the EU via a proposal from the director of the European Commission last March, could leave Spanish companies without some of the tax incentives that they currently count on. The issue is whether an idea promoted by France and Germany, with their own tax incentives at hand, will be neutral or harmful to Spanish companies, who may have to face a more significant tax burden.
