Straw ready to drop UK veto on tax to get EU constitution

Britian might for the first time accept abolition of the national veto in a limited area of tax policy, Jack Straw said yesterday in an apparent concession on a new EU constitution.

At a weekend EU summit, the Foreign Secretary said that the Government may be willing to accept majority voting on measures to combat cross-border tax fraud.

Officials later refused to comment on his words, insisting that the Government's policy to retain unanimity on all tax issues "remains unchanged".

But, unless made in error, Mr Straw's words suggest a new willingness to compromise over the EU constitution to avoid a damaging showdown with EU partners.

Although the Foreign Secretary reiterated the UK's position that the national veto applies to tax policy, Mr Straw said there might be an exception for "some, possible, details related to cross-border fraud".

A proposal covering just such issues is contained in a draft constitution drawn up by the former French president, Valery Giscard d'Estaing, which is now being finalised by EU heads of governments.

At present, all tax issues are decided by unanimous vote and keeping this system is considered to be one of the Government's "red lines". But, as the EU enlarges to 25 member states and with the prospect of deadlock on important decisions, pressure is growing to scrap veto rights.

M. Giscard's text says that majority voting should apply to efforts to combat cross-border tax fraud and administrative co-operation between tax authorities. All nations would have to agree which category a piece of legislation fell into, giving the UK, in effect, a "lock" over any specific move to scrap the veto.

Nevertheless, Britain has said it would block such changes on principle.

At the EU summit in Rome, which launched formal talks on the EU constitution, Mr Straw introduced a new caveat after noting that, under the proposals, "majority voting applies only once, by unanimity, the relevant council [of EU ministers] has decided that an issue raises questions of administration of the tax system or cross-border fraud".

He added: "We want to make sure that the whole of the relevant article, with the exception of some, possible, details related to cross-border fraud, is covered by unanimity".