An interesting paper has just been written by Damon Lambert, senior tax manager at KPMG, and published by Global Vision, which exposes the truth behind EU tax harmonisation. The paper shows how the proposed universal tax laws in EU countries are intended to be achieved through government pressures which enforce minimum rates of taxation, and individual policies which are then replicated by other member countries, and demonstrates that the Government has allowed tax harmonisation to progress by stealth.
The paper argues that tax harmonisation could allow the single market to realise its full potential, which it is unable to do at the moment due to obstacles such as double taxation, but concludes that lowering duties rather than harmonising taxes would be a far more effective measure.
Despite attempts by the European Commission to push tax harmonisation forwards, there is a relative lack of support for the regime from a majority of the member countries and individuals involved. This is mainly due to the negative consequences for local governments, and the imperfect nature of the regime.
The EU’s Commissioner for Taxation, László Kovács, has himself said:
“EU tax policy is increasingly being made as a result of Court decisions rather than as a result of coordinated policy actions of Member States.”
Lambert’s arguments against tax harmonisation highlight a number of negative issues, namely that harmonisation removes diversity, which is necessary to allow new tax experiments to be made, that a uniform tax rule would cause slow movement and an inability to react to change within the EU, and that it would lead to massive inequalities within Europe. He concludes:
“The EU Treaties should be rewritten to make absolutely clear that direct tax is a Member State issue, and to stop the ECJ and the European Commission using their powers to harmonise a tax system when they have no popular or Member State mandate for doing so.”
Lambert is absolutely correct in his analysis of the situation and implications of tax harmonisation. Harmonisation can only be bad for the taxpayer due to the high tax policies of the major EU countries, although Gordon Brown is doing his best to catch up. In particular, tax harmonisation would lead to significant changes and increases in taxation rates for countries such as Ireland and the Baltic Tigers who have experienced exceptional growth in recent years due to their low corporation tax rates and flat tax regimes. Why should they be made to forfeit their choice over the matter in order to bow to the demands of the greater European powers that be?