Prodi Proposals On EU Tax Slammed

by Jason Gorringe, Tax-News.com, London

24 May 2002

European Commission President, Romano Prodi's latest set of proposals with regard to EU enlargement and tax harmonisation have struck fear into the heart of member states such as Ireland and the UK.

Warning that when the economic bloc admits 10 new members, probably in 2004, the EU is likely to grind to a halt without reform, the EC President argued that provisions allowing member states to veto decisions in the areas of tax and social policy should be abandoned, and renewed calls for a direct tax in order to fund EU spending.

Currently, the European Union is funded by customs receipts and a share of VAT revenue collected by member states. However, Mr Prodi stated on Wednesday that he believes that this arrangement lacks transparency, and is too complex.

'We need to think about our own resources,' he told the European Parliament. 'The current system...makes it unclear how the link works between taxpayers and the Union's budget.'

Plans to remove the power of veto and extend majority voting to tax and social policy issues have also had the UK Treasury up in arms this week, and a report in the Financial Times suggested that even traditional supporters of Mr Prodi's plans to increase the powers of the European Commission, such as France and Germany, felt that it was unwise of the EC President to present a 'shopping list' of demands.

Unnamed British diplomats told the newspaper that they had 'struggled to find much we agree with' in the draft proposals, while the Treasury's official response deviated little from previous statements on the subject:

'We are against tax harmonisation,' a government statement announced. 'We believe tax competition is the way forward. The idea of the Euro-tax was floated by the Belgian presidency last year, and there were not too many supporters then.'

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