France and Germany presented a green paper on business tax convergence to Ecofin on 21 February. The paper identifies areas for convergence including group taxation; taxation of dividends; thin capitalization; offsetting of losses and corporate tax rates.

According to Germany's Federal Ministry of Finance, “the green paper is motivated by the desire to set the direction for greater tax convergence in the EU and support an initiative from the European Commission for a directive on a common consolidated corporate tax base.”

The Green paper follows an announcement made by Chancellor Merkel and President Sarkozy last August of plans to align both countries’ corporation tax bases and tax rates.

A study of effective tax rates published recently by PwC (Paying Taxes 2012, The Global Picture) showed that France's effective tax rate on corporate profits amounted to 8.2% compared to Germany's 19% effective tax rate. This divergence suggests that a widening of France's tax based may be in order to realise plans for convergence with Germany.

Further details are available at http://www.bundesfinanzministerium.de/nn_103466/EN/Topics/Europe/Articles/20120208-Franco-German-green-paper.html?__nnn=true