Kovacs Holds Line On EU Tax Competition

by Ulrika Lomas, Tax-News.com, Brussels

24 November 2004

The newly installed European Commissioner for Taxation, Laszlo Kovacs this week reiterated his opposition to proposals advanced by France and Germany for more control to be exerted over national corporate tax rates at the European level.

In an interview with the Budapest Business Journal, the former Hungarian Foreign Minister repeated comments made during his confirmation hearing in the European Parliament last week, arguing that there is no need for a minimum EU corporate tax rate, as suggested by members of the German and French governments.

“At my hearing, I stated my opposition to these initiatives,” Kovacs told the BBJ.

He added: “I believe that taxation should remain a national competence, because there are no studies proving beyond doubt that taxes are of major consideration when investors pick a location.”

Kovacs also dismissed speculation that the EU was about to move against Hungary with regard to its local business tax, a revenue-based tax levied by local municipalities on businesses which many experts have suggested runs counter to EU tax law.

“This issue was not raised during my parliamentary hearing, and (Hungarian Finance Minister) Tibor Draskovics did not mention it during my preparation,” Kovacs explained.

He also told the Journal that no decision has been made by the European Commission regarding Hungary’s simplified entrepreneurial tax (EVA), which has also been cited as being incompatible with EU law.

“The commission has not yet dealt with the issue officially, and I would like to find out what kind of views exist in this respect,” he observed.

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