The European Commission has unveiled plans to reduce corporate tax competition between EU countries with a single rulebook for the whole bloc, but could face opposition from certain member states.

Plans unveiled this week would effectively stop governments competing with each other with low tax rates and offering sweetheart deals to companies in a so-called ‘race to the bottom’.

Officials hope the new system, to be fleshed out by 2023, will reduce compliance costs, minimize tax avoidance and give governments the resources they need to rebuild the economy after Covid-19.

“Taxation needs to keep up to speed with our evolving economies and priorities,” said Valdis Dombrovskis, who leads the Commission’s work on the economy.

“Our tax rules should support an inclusive recovery, be transparent and close the door on tax avoidance. “They should also be efficient for businesses big and small.”

Details released so far outline the creation of a common tax base, where profits are allocated and taxed between member states based on a formula.

The commission said the current system operates as a drag on competitiveness, with high compliance costs for businesses that operate in more than one EU country.

This is not the first time the EU has attempted to reform corporation tax: efforts to create a common system in the bloc failed in 2011 and 2016.

The commission said the ongoing negotiations led by the OECD, with consensus on a new international tax system expected in the coming months, should give its plans momentum.

But this is “too optimistic”, according to Zach Meyers, research fellow at the Centre for European Reform think-tank.

“The OECD proposals will probably not eliminate tax competition between member states, so some member states will probably continue to hold out on an EU-wide proposal that hinders their ability to use tax policy to attract investment,” he said.

“The timing is odd, because an agreement at the OECD is surely not far away.

“The Commission might have thought that, once the outlines of the OECD agreement are known, and we can see clearly who’s won and lost, it might be even more difficult to find EU-wide consensus.”

Countries such as Ireland and Luxembourg, which have long faced accusations of being tax havens, are likely to oppose the scheme, said Meyers.

Indeed, Irish finance minister Paschal Donohoe in a radio interview this week said he has “significant concerns” about the proposals.

“The commission hasn’t said they want to eliminate tax competition by setting a uniform EU-wide corporate tax rate, but that won’t be enough to avoid disagreement,” said Meyers.

“I think they could end up pursuing more achievable goals such as more tax transparency, for example.”