McCreevy Shows Hostility Towards EU Tax Harmonisation

by Ulrika Lomas, Tax-News.com, Brussels

14 November 2005

Charlie McCreevy, the European Union's Internal Market Commissioner, stated in no uncertain terms last week that he is opposed to a move towards corporate tax harmonisation in Europe.

In a strongly-worded speech in Brussels, Mr McCreevy, formerly Ireland's Minister of Finance, who was appointed to the commission earlier this year, asserted that he was determined not to "tiptoe" around the divisive issue of EU taxation, stating that he is "emphatically opposed to tax harmonisation - be it by the front door or the back".

“Tax harmonisation is not on the agenda, nor will it be,” McCreevy remarked.

His words will come as something of a relief to several member states, such as Ireland, the United Kingdom, and many of the new intake of countries in Central and Eastern Europe which have set low rates of corporate tax in order to attract foreign investment.

McCreevy's comments are also likely to set up a clash with many of the original EU15 member states, particularly France and Germany which are worried about the new member states poaching investment away from their struggling economies and have suggested the creation of a corporate tax 'corridor' and the watering down of the national vetoes on tax issues.

However, the Commissioner argued that tax competition is a healthy thing and will be here to stay.

“National vetoes will be retained and competition between member states for inward investment - some of it tax based - will continue," he stated.

McCreevy also voiced doubts on the slightly less contentious issue of harmonisation of the corporate tax base, a proposal intended to simplify tax procedures for EU businesses and which is supported by the EC's Tax Commissioner, Laszlo Kovacs.

“To establish a common tax base we will need first to get agreement on what constitutes taxable profits. Assuming we can agree on [this] during our lifetime, we will probably then have completed one third of the journey. The harder bit comes next," McCreevy observed.

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