French President Nicolas Sarkozy and Germany’s Chancellor Angela Merkel’s plans announced yesterday for a single eurozone corporate tax rate have been given a tentative thumbs up by the ABI.
A single corporate tax rate would be a transformational step that would have a big impact on the bottom lines of a range of insurers domiciled across Europe such as Beazley (Ireland), Brit (Netherlands) and XL Group (Ireland).
An ABI spokesman said: “The ABI is aware of the proposal to develop a common, consolidated corporate tax regime, which has been mooted for some time. While the UK would not be part of any such regime if it was to happen, we recognise that there could be some merit in developing a simple, consistent and uniform corporate tax regime in the eurozone.”
However, because the UK falls outside the eurozone governance, it remains to be seen whether the UK Government will adopt a ‘beggar thy neighbour’ policy by undercutting rival counties.
The meeting between the two European leaders was slammed by European politicians for failing to introduce ‘eurobonds’ – a debt guarantted by all members of the eurozone which would benefit struggling peripheral economies with a lower interest. Eurobonds, if introduced, could become a key part of the insurers’ investment portfolio.
MEP Sharon Bowles, chair of the European Parliament’s Economic and Monetary Affairs Committee said: “Analysis estimates the size needed for the EFSF has now escalated to €3.5 trillion - I myself have been calling for an increase to at least €2 trillion - aiming at a deployable fund in excess of €1 trillion, but beyond that I query whether it is wise, what with the current working of the guarantee arrangements and the AAA hang-up.
“Eurobonds look more efficient and work to that end must be commenced so they can be ready as the ‘last resort’, which Merkel and Sarkozy acknowledged yesterday.”
