Slovakia Attacks Franco-German Corporate Tax Proposals

by Ulrika Lomas, Tax-News.com, London

28 May 2004

The Franco-German alliance call for harmonisation of corporate tax rates across the European Union to protect their high tax regimes has attracted fresh fire this week with a public rebuke from the Slovak government.

"Harmonisation means higher tax levels. That's not bringing Europe forwards," Slovak finance minister Ivan Miklos told Handelsblatt.

"That is totally unacceptable for us," he added.

“We simply dismiss any efforts leading to harmonization in the area of taxes."

In a bid to stimulate investment at home and from abroad, Slovakia has recently introduced a 19% flat rate tax, which includes personal and corporate income tax, a level which compares sharply with Germany’s 38.8% company tax rate. Other new EU entrants have chosen a similar low tax path with business taxes.

However, the larger and more established member states already struggling with low growth rates fear that they will not be able to compete with Eastern Europe on tax, and are dismayed that through contributions to the EU budget, they are indirectly subsidising these cuts.

In response, Germany and France recently proposed harmonisation of the EU corporate tax base and a tax ‘corridor’ setting maximum and minimum rates at which member states can levy corporate tax.

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