New EU tax harmony plan

THE GOVERNMENT was thrown on to the defensive last night as evidence emerged that it was willing to agree to harmonise taxes throughout Europe.

A senior European Commission official said EU states were now ready to co-ordinate taxation policies, and a common tax policy was necessary to complete the single market.

Tony Blair has ruled out common rates of income tax, but optimism in Brussels suggested Britain may give ground as EU countries seek to bring company tax levels into line. That would alarm business leaders in Britain, where corporation tax rates are amongst the lowest in Europe.

Vanden Abelee, a senior Commission official, said : "The need for an increased level of tax co-ordination, and the willingness of member states to go down that road, is now clear."

He said such co-ordination would need to "strike a balance" between the fiscal sovereignty of member states and "the removal of all distortions of competition and the remaining barriers to a fully functioning single market". Mr Abelee denied that the Commission was trying to seize tax powers from national goverments.

Eddie George, page 8