Let me answer from the perspective of the owner of a small company based in Germany that, however, has international customers.
wouldn't it be easier [...] taxing the profit gained on the ground of the given country?
I don't see that it would make things easier - to me it looks as if that would create an amount of additional burocracy which I estimate to be more than at what I'd estimate the gain in tax collection fairness.
I'd like to add a personal political statement in this context: it is my political opinion that more rules inherently create more unfairness. At least at the level of laws and regulations we have in Europe nowadays.
If it weren't so sad, I'd find the estimates of "no additional costs" that often come with new proposed legislation quite funny: MPs seem to forget systematically that there are people out there who have to put in working time (at European hourly wages) to read these even just to understand whether they are affected by that legislation. And that this is time/money that is lost for being productive in business.
Others have already said that VAT rules typically put the country where things (goods or services) are delivered/sold as the one who gets the VAT. So we there already have a situation that is to a certain extent similar to your proposal.
Being in the B2B sector, I (my business) have the advantage that for the other countries I've been dealing with so far, there are tax treaties that handle this in practice by the so-called reverse charge process: usually (i.e. with domestic customers) we collect the VAT for the tax office and then every so often wire the net amount of due VAT to the (German) tax office. Reverse charge means that our customer takes care of the due VAT.
Now VAT, say, for a product sold in France is due to France, and with their tax level. With the reverse charge procedure, our French customer who as a business knows about French VAT (naturally much more than we do) and does have a French VAT number does the burocracy.
- Without the respective tax treaty allowing reverse charge procedure (or with French consumers as customers), we'd have to find out how, which and when to pay those taxes in France, plus doing the respective tax declarations.
Declaring (incl. keeping track of deadlines, getting tax numbers, etc.) taxes in every country where we ever had a customer* would be a burocratic nightmare that for small businesses like ours would be prohibitive: we wouldn't be able to offer our services internationally because the costs of taking care of tax burocracy would make it uneconomic. So one side effect of your proposal would be that only businesses above a certain size would be able to offer services internationally. Ironically, the big multinationals would be best able to do this. In other words, we'd get an entrance barrier that would protect big companies from small competitors...
VAT is much easier in this respect than corporate taxes, though: the legal construction (at least here in Germany) is actually not a value added tax: it is a tax on the full sales price. And a second tax on the full sales price of goods I buy that gets reimbursed. This construction makes it easy to calculate how much VAT is due to France in my example above, without the need to track what fraction of tools I bought can be attributed to the sales in France and thus deducted: if I buy the tools in Germany, clearly a German VAT reimbursement is due.
For a tax that is calculated on the basis of profit, however, it would be necessary to find out which fraction of the business costs can be attributed to each of the countries where we had customers.
This means that for coporate tax in each country of sales we'd have even more burocracy. And if the purpose of the per-country-taxation is to have a more fair distribution of taxes, there would be tons of rules for these assignments (see the explanations of other answers on how conglomerates of corporations shift around profits and losses - that would suddenly be possible not only for big multinationals but for every small business. But businesses who'd not be after tax evasion (or optimization within the legal possibilities**) would have to shoulder their part of the burocratic burden that becomes necessary.
This part of the additional burocracy may be avoided if tax rates are similar between the different countries as the incentive for shifting around profits and losses vanishes. The burocracy of declaring in each country the profit there would stay, though, without any net change in collected tax.
Some countries have the idea that unburocratic handling of one-time situations is beneficial, so they do it:
- (Non EU) countries I've dealt with: In Canada, instead of going through the process of getting a tax number (and from now on hand in Canadian tax declations as well) there was the possibility of the customer with their tax number paying a so-called withholding tax on our behalf. IIRC, Switzerland also has a so-called Abgeltungsteuer which basically is a flat-rate taxation on sales in Switzerland.
The smaller a country is the more it needs foreign suppliers: there will be all sorts of niches where its domestic market is too small to host even a single company catering that demand - not to speak of a healthy competition. And of course, the entrance barriers for that market cannot be too high: otherwise foreign companies will decide it is not worth while to serve that market which would throttle the economic branches demanding the goods/services in question. So while big countries like the US or also the EU as a common market may have the power to dictate their rules, small countries just cannot.
As for sales within the EU, the ease of having to declare and pay taxes basically to your home country only instead of is one of the basic ideas of a domestic market and the "four freedoms". And yes, that can only work long term if the tax rates aren't too different across the member states (taking into account differences in infrastructure etc.). But an important idea with the EU is that a large number of countries who on their own are each of them too small to be able to negotiate their position in the international market can form one common market that is then a sufficiently big player internationally.
One important question is what you want to gain in terms of taxes: Do you think
- the distribution, i.e. where tax money arrives in the end shoud be improved, or
- whether unfair advantages in competition should be reduced, i.e. companies from countries A and B should have the same tax burden when competing for customer in location C?
- Or is is rather a fair competition between countries if each of them can decide their own tax rates (maybe within limits)? Or even a much needed instrument for countries to offset e.g. infrastructure they still miss? Would you rather have countries paying subventions to businesses that are willing to settle there?
For distributing collected tax money within the EU, it may be much cheaper overall (though also less transparent) to do this approximately via negotiations on payments between member countries. After all, it is already known who sold how much to whom in the other EU countries (we have to submit this data as part of the reverse charge VAT procedure).
In terms of tax logic (yes, I'm an optimist and still think there's a certain amount of logics also behind taxation ;-) ): corporate tax is roughly speaking the income tax of a corporation. From that point of view, it does make a whole lot of sense to me to handle corporate tax and income tax along the same lines (also because otherwise there'd be a lot of headaches about loopholes and double taxation - or still more burocracy to try and catch up with these headaches). In Germany one of the ideas in the tax system is that ultimately, how much tax you pay should be approximately independent of the legal form you choose for your business.
The changes would be quite far reaching if also income tax for persons is affected.
Similarly, at which level do we want to stop to distribute according to customer location? Körperschaftsteuer (lit. corporate tax) in Germany goes part to federal and part to state/province taxes. Should the Länder (states) get a more fair treatment by customer location as well? And then there's the remaining part of a German business's "income tax", the Gewerbesteuer (literally commercial tax) which goes to the municipality where the business is registered. Should that also change to be distributed according to where customers are located? (see also @Philipp's answer).
One important point with the taxation at the location where the business (or the person) is registered is that this way you can have progressive taxation more easily. In Germany, that is more pronounced for personal income tax (freelancers), but for sole owners also Gewerbesteuer has an exemption limit. With taxation according to location of the customer this would in the extreme case require reporting to all countries where you had customers the total profit in addition to the local profit. And as soon as the rules for busiess expenses differ between countries, you'd end up submitting $n$ different full tax declartions! (Already inside Germany the rules for what commerial law and tax law consider profit and valid business expenses differ in some important points...)
* In my experience the duty to declare taxes would also stays for at least several years without business before the country in question would close your tax account and invalidate the issued tax number.
** Side note: depending on what type of business we're speaking there could arise situations where the management is basically forced to do such an optimization. And this is not only responsibility against stakeholders, but if, say, a limited liability corporation ends up being insolvent and it turned out too much taxes were paid, managers could be liable with their private money e.g. to creditors.