Mr. Gary Tobin:

It is an important question about how the whole system would operate. Essentially, if one had a company with a particular level of profit, that profit would be put into a central bucket. It would be reallocated back to be taxed at the individual tax rate of an individual European country, depending on what percentage of sales were carried out in each country, the percentage of labour, the number of employees in each country and the percentage of assets.

The Commission has posited that this formula would be on the basis of three thirds. One would make one's estimation on the basis one third of fixed assets, one third of sales by destination and one third of payroll. The Commission has always been careful to say that ultimately this is a political decision. It would, therefore, be up to the Council to decide how it finally wants to allocate the profit, and what final formula it would like.

Given that the financial crisis has engulfed the whole eurozone and the wider community, it is fair to say that most countries are now more reluctant than they have ever been to potentially give away part of their tax base and allow a new system to reallocate it based on a formula that probably has not been fully worked out. While the sharing mechanism and consolidation element of the proposal is central to what the Commission has brought forward, in the current environment the level of scepticism around the consolidation element of the proposal has probably increased quite significantly.