EU Constitutional Convention Moving Towards Harmonised Tax Regime

by Ulrika Lomas, Tax-News.com, Brussels

06 May 2003

As might have been expected, the EU's constitutional convention under the leadership of ex-French President Valery Giscard d'Estaing is moving towards a proposal that the national veto on tax should be scrapped.

Giscard's position, like that of most European federalists under the slogan of 'ever closer union', is that in a Union of 25 members there will never be a coherent, unitary Europe if such an important policy aspect as tax is left to be batted around like a football between competing member states.

That is no doubt true; the problem in the eyes of countries like Ireland and the UK is that the social model which France and Germany would like to impose on Europe is essentially uncompetitive. So they see Giscard's plans as being simply an attempt to prevent lower-taxing states from competing 'unfairly' within the European super-state.

Mr Giscard d'Estaing is said to be determined to press the issue, even though Britain and Ireland are opposed to any move towards qualified majority voting on fiscal issues. John Bruton, a former Irish prime minister and a member of the constitutional convention, tried and failed to persuade him to abandon the plan, which he calls 'crazy'.

Realizing that there is no chance of getting the UK's agreement to the established model of qualified majority voting, the convention's officials are pondering the idea of a "super-qualified majority" for some fiscal matters.

While the convention struggles to extend the powers of the emergent super-state by diminishing national voting power, the European Court of Justice has been moving ahead in the same direction with a series of judgements against national tax authorities, mostly based on the principles of the freedom of movement and establishment, which run counter to many preferential national taxation rules.

Last November, British cabinet minister Peter Hain dismissed Giscard's statements as vapourings after the ex-French President said he expected tax harmonisation to be one of the key features of the EU's new Constitution.

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