Parliament: Cook rules out tax unity for Europe says Cook

TAXATION

THE GOVERNMENT is to fight plans to end the national veto over tax harmonisation by seeking the co-operation of other sceptical member states, Robin Cook said yesterday.

The Foreign Secretary stressed that there was no majority among countries to scrap the present system of unanimity required to introduce greater tax harmonisation.

"It is not just Britain but many member states who will oppose tax harmonisation," he said, opening a debate on the European Union, ahead of the forthcoming European Summit in Vienna.

Earlier the Prime Minister's official spokesman said that Austria, Sweden, Finland, Denmark, Ireland and Greece were also opposed to ending the national veto on a common tax policy.

The Government is appointing an extra 33 officials to the European Union to improve co-operation between Britain and member states.

During his speech, Robin Cook said that tax harmonisation was "quite simply not going to happen".

Dismissing the "myths and mischiefs" that had been "peddled as facts", he said: "There is no majority for the harmonisation of tax rates in Europe, never mind the unanimity which would be required for any action. Nor is the need for unanimity going to change. It would require all members of the European Union to agree on a change to qualified majority voting on tax. Most member states will not agree."

He said, however, that Britain would "vigorously support" measures to tackle unfair tax breaks that distorted free trade or provided an illegitimate industrial subsidy".

Pointing to the need for a level playing field on excise duties, he added: "And where there is a British interest in co-operation on tax, we will support it . . . and where there are limited proposals for co- ordination on tax rules which are of benefit to Britain we should support them."

But like "most other member states", the Government would resist any moves to harmonise direct taxation, corporation tax and proposals for a European withholding tax on interest on savings.

"The member states of the European Union are going to continue to have tax systems which remain distinctive, even sometimes eccentric . . . Germany has a special tax on coffee. I can't myself see the French swallowing a tax on coffee," he said.

But Michael Howard, the shadow Foreign Secretary, said that Britain was facing pressure, as Oskar Lafontaine, the German Finance Minister, had asserted, to move towards a single European state.

"This is a great march towards a single European state and the British Government will have to respond. This is not something the Government can fudge."

Mr Howard said that the European Commission was preparing to publish suggestions for a common VAT regime, which put Britain's zero rates at risk and could lead to the introduction of VAT on food.

Gerhard Schroder, the German Chancellor, delivered a fresh blow to Britain in the dispute over tax harmonisation by backing the stance of Mr Lafontaine.

Mr Schroder's intervention contradicts British claims that Mr Lafontaine had gone out on a limb on Tuesday by suggesting an end to the national veto in taxation policy. In an interview in the Financial Times, Mr Schroder said: "We will never have a complete harmonisation because of differences in countries' tax bases. But I stress that the Finance Minister has the backing of the government when he demands steps in this direction."

Mr Lafontaine's view on majority voting was, he said, "not only the personal view of the Finance Minister. It is also the position of the government."

He added: "We know that there are different opinions in Europe but that doesn't mean that it is not sensible in a single market with a single currency to have better tax co-ordination."