Sarkozy Maintains Controversial Corporate Tax Stance

by Ulrika Lomas, Tax-News.com, Brussels

12 October 2004

Unbowed by recent statements from the European Commission to the effect that tax competition in the EU is apparently here to stay, French Finance Minister Nicolas Sarkozy once again suggested that the new member states should be stopped from slashing their corporate tax rates whilst receiving large sums in structural aid.

Writing in the French daily Les Echos, Sarkozy argued that “One does no favours to either Europe or new members by organising and financing fiscal and social dumping."

He added: "Because what else can you call it if certain countries are authorised to cut their taxation on companies to zero, while at the same time they receive financing in very significant proportions, paid for by taxpayers in other member states?"

Sarkozy, supported by his counterparts in the German government, wants the EU to consider linking the amount of infrastructure aid received from the EU’s structural budget to corporate tax rates.

However, the European Commission has dismissed the idea as too complex to administer and incoming Industry Commissioner Guenter Verheugen recently called Sarkozy’s proposal “not realistic.”

Meanwhile, incoming Taxation Commissioner, Ingrida Udre, has also rejected the idea of fixing company tax rates, asserting last week that tax competition “is normal in a free market".

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