Hague's Tax Ogre Unmasked As His Only Friend In Brussels

by Jeremy Hetherington-Gore, Tax-News.com, London

24 May 2001

The tax-harmonising Brussels ogre fielded in the last few days by the UK's Tory party in furtherance of its anti-European mantra turned out to be mild-mannered economic liberal Frits Bolkestein, who would almost certainly vote Tory if he was British, and has got more in common with Cobbett than Colbert.

Mr Bolkestein, Commissioner for Taxation and the Internal market, apologised yesterday for his unwitting intrusion into the British electoral process, and re-emphasised he was not in favour of any harmonisation of EU income taxes. "As long as I have anything to say in this area, harmonisation of income taxes is out."

The Commission's proposals, revealed yesterday, are in fact for the harmonisation of the tax base, not of rates, and forms part of a new strategy on tax which replaces previous attempts to harmonise rates and dilute the requirement for unanimity on tax matters, abandoned after the Nice summit failed to make progress.

Harmonisation of the tax base, and almost as important, making it coincident with national standards for profit reporting, is a measure which should command widespread support, and would allow comparisons to be made between the performance of companies across Europe - something which is next to impossible at the moment. The development of a unified capital market in Europe, which is in itself a key component of the creation of the single market, is hobbled by tha absence of comparability and transparency in the calculation of profits.

When countries have harmonised the way they calculate the business tax base, company tax rates will differ more than they do now, Mr Bolkestein said. "Some fiscal advantages or sweeteners are hidden in that tax base and this will drive them out into the open."

The Commissioner says 'when', but he means 'if'. Harmonisation of profit reporting is the Holy Grail for accountants, and is being pursued vigorously by international accounting standards bodies, led by Sir Andrew Tweedie, who has done so much in the UK to make reporting more transparent. But no-one thinks it is going to be easy, since the murky practices referred to by Mr Bolkestein will be defended tooth and nail by national interests. So don't hold your breath.

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