France And Germany Propose Tax Harmonisation Push

by Ulrika Lomas, Tax-News.com, Brussels

03 December 2002

In a move which is likely to put them on a direct collision course with the United Kingdom and Ireland, France and Germany have forged ahead with proposals designed to harmonise corporate tax and VAT rates across the European Union, and to remove the right to national veto in areas of tax related to possible distortion in the single market.

Reporting at the weekend, the Financial Times revealed that:

'The tax question will be addressed in a joint Franco-German paper on economic governance, and follows rapidly after separate documents on defense and justice and home affairs. But the most significant paper could come in January, when Paris and Berlin hope to unveil an ambitious joint document on how the European Union should be run, to coincide with the 40th anniversary of the French-German Elysee treaty.'

According to the FT, the report being prepared for January recommends that: 'The objective of these changes should not be the establishment of unified taxes, nor should it concern personal and property taxation.'

However, it does call for minimum standards and some harmonisation of rates in certain areas, arguing that countries such as Ireland and pre-accession nation, Estonia, use low corporate tax rates to create 'unfair tax competition', and distort the single market.

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