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Bolkestein Defends ECJ's Tax Role Whilst Rejecting Harmonisation Claims

by Ulrika Lomas,, Brussels

09 December 2003

Addressing the European Commission Conference on company taxation in Rome last week, Internal Market and Taxation Commissioner Frits Bolkestein commented that whilst fundamental reform of the single market’s corporate tax code was essential, claims that the Commission is intent on tax harmonisation were “nonsense”.

“I think it is fair to say that it has become increasingly evident that we cannot avoid reforming the way in which companies are subjected to corporate taxation in the EU,” explained Mr Bolkestein. “Major changes are inevitable if we wish to have a real Internal Market without company tax obstacles. More and more people and institutions acknowledge and support the case for comprehensive reform.”

He continued by observing that the reforms, if fully implemented "will effectively tackle the tax obstacles and reduce distortions while fully respecting Member States' fundamental prerogatives in on tax matters, in particular their right to set their tax rates.”

However, Bolkestein defended the increasing role that the European Court of Justice is taking in defining corporate tax law across member states, a development that the business community in the UK in particular has warned threatens to undermine national governments' ability to influence tax policy. “EU company tax matters and Court rulings in the field of direct taxation are making headlines these days, receiving a degree of public attention that was unheard of before,” he said, continuing:

“Many people may regret the increasing number and significance of Court decisions in the tax field. I do not."

He added: “I think it is fair to say that the Court is simply doing its work and applying the EU Treaty in the tax field.”

Bolkestein rejected the arguments of those who propose that the EU Treaty should be amended to prevent the ECJ influencing tax law. “Such an action would be a fundamental step backwards and would endanger the whole concept of the Internal Market,” he observed.

The Commissioner argued that the primary objective of the EU’s company tax policy should be reducing the compliance burden and increasing competitiveness in relation to the United States.

“And tackling these issues is a far cry from engaging in harmonisation of Member States' tax systems. Let me be blunt about this. The notion that Brussels has a long-term agenda of wholesale tax harmonisation is just utter nonsense,” he remarked, adding:

“Closer co-operation is the right response. And I say co-operation, not harmonisation.”

The Commissioner then went on to warn that: “Member States can choose either to welcome these developments and contribute to the design of the future system or to oppose change and find themselves inevitably on the losing side as more and more issues are brought before the Courts.”

TAGS: Italy

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