A common business tax across the European Union would push up costs for British business by £4 billion a year, according to research published yesterday.

Studies by the Saïd Business School, at OSingle European tax could cost UK business £4bn, academics warn xford University, showed that total EU tax revenues would increase by more than 8 per cent if plans for a Europe-wide system of corporation tax go ahead.

British business would face a higher tax burden, as part of the harmonisation of corporate business, the study by Michael Devereux and Simon Loretz, concluded. Under proposals by the European Commission, companies operating in several EU states would declare only their EU-wide profits. The tax revenues would be dispersed across Europe.

The plans for a “common consolidated corporate tax base” have yet to be finalised but yesterday a majority of commissioners approved a report into creating such a system.

The proposals do not affect tax rates in individual countries; the aim is to give companies operating in Europe’s single market the same rules for calculating their corporate tax base, instead of dealing with 27 different national systems. The Commission argues that the proposed rules would make the business tax system more transparent. At present, it says, companies find it impossible to decide which countries are the most competitive for tax purposes.

The proposals have met fierce opposition from some member states, including Ireland, which are concerned that such a move would be the first step towards the harmonisation of corporate tax rates across the EU.

Ireland’s Charlie McCreevy, the Single Market Commissioner, raised objections yesterday and Gordon Brown is believed to be ready to oppose the proposals strongly when the Commission unveils them next year, with legislation planned to be in place by 2011.

If passed, the rules may leave companies the choice of whether or not to submit a single return for their European-wide operations. If companies are forced to participate, total EU tax revenues are likely to increase by more than 8 per cent, the Saïd study said. UK corporation tax revenues could rise by more than 20 per cent.

The total UK corporation tax take at present is about £50 billion, the authors said.

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