European tax plans `to cost pounds 2,000 a head'

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THE GOVERNMENT'S plans to harmonise British taxes with Europe would cost every taxpayer pounds 2,000, William Hague will claim today.

In a speech, the Tory leader will argue Britain would suffer because taxes would be "levelled up" to the higher rates that exist on the Continent.

But Labour leaders dismissed the Tories' claims as "absolute rubbish" last night and rejected Tory allegations that up to 180 different taxes - including stamp duty on house purchases - will be brought into line throughout Europe as part of a British-backed drive to end "harmful" tax competition.

The Treasury insisted that only five British taxes were on the EU's list, including tax breaks for the British film industry, and said that only a handful of other taxes would be added shortly.

Attending a meeting of EU finance ministers in Brussels tomorrow, Gordon Brown will play down the threat to Britain, saying that the Government would have the power to veto any proposals to bring Britain's taxes into line with the rest of the EU. The Chancellor will win approval for his plan to create a "fraudbuster" with tough powers to investigate allegations of corruption in EU institutions. The move follows the resignation of the entire European Commission earlier this year after an inquiry found evidence of fraud and mismanagement.

Mr Brown will play for time in the continuing row over EU plans to impose a 20 per cent "withholding tax" on savings, which is threatening jobs in the City. He will say that Britain is not yet ready to submit a report on its position because the Government is still consulting the financial institutions on the proposal's impact.

But Mr Hague's speech, to be made at the London Business School, will ensure that the tax issue remains at the forefront of the campaign for next month's European Parliament elections.

"The tax harmonisation agenda is a high-tax agenda for Britain," the Tory leader will say in his speech.

"We should be doing everything we can to widen the gap on taxes rather than narrowing it. I want Britain to be the low-tax capital of Europe."

Mr Hague will call for the Government to call an immediate halt to the work of an EU committee, chaired by Dawn Primarolo, the Paymaster General, which is looking into tax harmonisation.

But Patricia Hewitt, the Economic Secretary to the Treasury, last night accused the Tories of producing "bogus scares" in an attempt to hide their own divisions on Europe.

"This government has said time and again that it will not sign up to proposals that will damage Britain," she said.

"Fair tax competition, not tax harmonisation, is the way forward for Britain. It is time the Tories admitted that they cannot stand up for the national economic interest in Europe because of their divisions and weak leadership."