[A-List] EU integration struggles: tax

[Michael Keaney]

Franco-German axis revived in EU tax reform plan
By Stephen Castle in Brussels
The Indepedent, 03 December 2002

France and Germany have bolstered their rejuvenated diplomatic alliance with
plans to push important tax harmonisation measures through the European
Union.

The initiative, which would cover corporate tax and VAT, is part of a
concerted effort by the governments in Paris and Berlin to revive the
partnership between the two capitals that has traditionally dominated the
EU. It also threatens to revive the bitter dispute that broke out in autumn
1998 when London blocked a similar Franco-German drive for tax
harmonisation.

Since 1998, the Franco- German motor had stalled, leaving Tony Blair able to
set the agenda on important issues such as economic reform.

But at a summit in Brussels in October, President Jacques Chirac and
Chancellor Gerhard Schröder surprised other leaders, including Mr Blair, by
striking a pre-emptive deal over the future of the common agricultural
policy.

Since then the French and German governments have agreed joint policy
documents on European defence and justice and home affairs, and are drawing
up a paper on the future shape of EU decision- taking early next year.

Their finance ministries are also discussing a joint position on economic
governance, including tax, which will be sent to a convention on the future
of Europe chaired by the former French president Valéry Giscard d'Estaing.

The Franco-German proposals on economic governance would not cover income or
property taxes. It would be designed to create a level playing field across
the EU's internal market. On VAT there is already EU-wide co-operation, with
minimum rates agreed for most products.

M. Giscard has already said he wants to identify areas where tax policy
could undermine the single market, and that he would propose that decisions
in these spheres were taken by majority voting. Diplomats believe that Mr
Blair, and his Irish counterpart, Bertie Ahern, will resist any attempt to
introduce further tax harmonisation, or to scrap the veto on tax issues that
each EU member can invoke.

News of the new Franco-German drive on tax harmonisation came on the eve of
a crucial discussion today in Brussels when EU finance ministers haggle over
the fate of long-running plans to introduce a tax on savings across the 15
member states.

Luxembourg has said it may veto an accord that would require member states
to share data on EU residents' savings.