With so many poorly designed agreements, Europe runs the risk of putting itself into a maelstrom of proposals that will never end up well. That is what German chancellor Angela Merkel and French president Nicolas Sarkozy did on Tuesday, and now the most difficult task remains: to create and implement a real reform.
One of their main objectives is to create a common tax for businesses in Germany and France, which could go into effect in 2013. But for this to happen, there is a lot of technical work to be done, work that will define the tax to be imposed and the tax burdens on other European countries.
According to Citibank analyst Luis Campuzzano, the new tax rate in Germany and France could end up around the current corporate average of both countries. Said in another way, in Campuzano?s opinion, France could reduce its average rate and Germany raise its, resulting in an intermediate and unified level.
Banca March is not considering the ultimate values to be as relevant in and of themselves. And Ofelia Marín explains that the measure that France and Germany adopt is more or less trying to provide an example and that it is not only concerned with balancing corporate taxation, but also everything behind that step: deductions, amortizations, etc. Marín believes that the actual tax rate usually differs from the nominal tax rate because of multiple exemptions and variations.
Nuria Álvarez, from Renta 4, assures that in this case, the logical conclusion would consist of undertaking a study to analyze the impact of minimizing harmful repercussions from this kind of fiscal union and, in essence, that the initiative doesn?t result in significant losses or profits for either side.
Further still, Alvarez is emphasizing that the new tax rate should take into account other countries that utilize the euro and try to build consensus with them. At the least if the measure passes and extends to the rest of Europe. For this reason, she also understands that Germany just as much as France would have to outline a progressive schedule that aims to slowly administer the results of their decision.
