The incoming European Industry Commissioner Guenter Verheugen nailed his colours to the tax competition mast last week by dismissing claims that Eastern European tax cuts amount to fiscal dumping.
"I don't see dangers of relocation of industry from the old member states because of the tax gap,” Verheugen told a European Parliament confirmation hearing.
He added: "Social dumping is a kind of myth. I don't think that low corporate tax rates in the new member states are going to be an incentive for the relocation of business."
Verheugen also poured cold water over an idea by French Finance Minister Nikolas Sarkozy to link tax rates to structural funding to prevent the main contributors to the EU budget, in French and German eyes, subsidising tax breaks in the new member states.
"The link that was made by Mr Sarkozy is not realistic," commented Verheugen.
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