EU Dismisses German Call For A 'Tax Corridor'

by Ulrika Lomas, Tax-News.com, Brussels

05 May 2004

As ten new states officially acceded to the European Union at the weekend, the EU rejected a call from German Chancellor Gerhard Schroeder for member states to adopt measures aimed at preventing ‘tax dumping’.

Addressing a press conference in Brussels, EU spokesman Jonathan Todd argued that fair tax competition will be beneficial for the enlarged EU, and suggested that the German leadership was “barking up the wrong tree” with its claims that the lowering of tax rates in certain member states amounted to “tax dumping”.

“German companies are going to benefit enormously from enlargement, in terms of access to new markets,” commented Mr Todd, adding that the Commission has “no intention absolutely whatsoever to harmonize tax rates.”

The EU was reacting to Mr Schroeder’s suggestion that it establish a “tax corridor”, setting minimum and maximum levels at which member states could levy corporate taxes. Todd brushed aside the proposal, stating that the setting of company taxes was a matter for “national sovereignty”.

Mr Schroeder has been a harsh critic of the tax policies of several new member states, stating in a recent report that they cannot "on the one hand destroy their state income with low taxes and on the other hand build up their infrastructure using aid from the EU."

"Germany as the biggest net payer of the EU has to finance unfair tax competition against itself," the Chancellor pointed out.

The 2004 global corporate tax rate survey recently published by KPMG has revealed that the new intake of countries into the EU has brought the single market average company tax rate to 27.4%, significantly below Germany’s 38% rate, the highest in the EU.

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