Today’s FT reports that the Government have become so worried about the number of companies being driven to Ireland by high-tax Britain that they are considering supporting EU tax harmonisation. In essence, having gone a long way towards ruining our economic competitiveness with tax and red tape, they have decided the fault lies not with themselves but with our neighbours who have wisely created a welcoming environment towards business.

This corrosive idea that "tax competition" is a bad thing that somehow lets low tax economies "steal" revenue from high tax economies is one that the EU Commission and various Unions have been peddling for quite some time, and threatens to do a lot of economic – and diplomatic – damage.

Ireland’s economic success, for example, has been founded on low corporation tax rates. Faced with companies like Shire moving to the Republic, the obvious path would be for UK Plc to emulate the Irish and cut our own rates to similar levels to encourage businesses to stay and to spur our economy on. The harmonisation approach is simply jealousy – trashing someone else’s success rather than trying to achieve anything yourself.

The unfortunate thing is that whilst smashing your neighbour’s new car in a fit of jealousy might seem the best thing to do at the time, it will swiftly have repercussions on the vandal as well as the vandalised.

First up, companies like Shire will simply go somewhere else that has low taxes, and instead of Britain losing out, Britain and Ireland lose out – not exactly the result you were after.

The obvious next step (obvious if you’re a harmoniser, of course) is to try to extend the enforcement of high taxes. That’s what’s been happening in recent years with the EU trying, sporadically, to bully Switzerland into increasing its tax rates, and it’s hardly a pleasant way for friends and neighbours to behave towards each other. Pressurising other countries to change their domestic tax policies in order to protect your economy from the effects of you high taxes is not only unedifying, it’s anti-democratic. It’s very revealing of the EU’s true opinions that underneath all the guff about peace across Europe, the greater Europa and a brotherhood of nations, as soon as one country dares maintain some independence and uses it to be successful, the Commission rounds on them with threats.

Even if you eventually succeed in forcing the whole globe to have universally high corporation tax (God forbid), the only result is that the global economy is made more sluggish by the level of taxation, resulting in lower profits, reduced GDP, fewer jobs and more misery.

The alternative is simple. If Ireland are outdoing us because they have got a tax system that works well, we should emulate it, not try to stamp it out as so called "unfair competition". It’s not as though they have some unfair advantage – we have the power to slash corporation tax tomorrow, we just choose not to. It’s stupid policies on our part, not some kind of weasily deception from the Irish.

Politically speaking, the harmonisation approach does not only store up economic problems and human misery for the future, it will make life much more difficult for the Government as a whole. Britain is short on allies, especially like-minded allies, in the EU, so alienating Ireland on such a crucial issue is a bad move. Furthermore, it makes people like Kitty Ussher MP sound rather hollow when they claim to stand up for business and national freedoms in the face of top-down EU legislation, as she does elsewhere in the same FT edition.

The Government have mismanaged the public finances to such a degree that they are really starting to panic – they must be careful that their short term thrashing around to find a scapegoat does not result in the economy, friendly relations with our neighbours and our democratic right to self-determination taking a beating we can ill afford.

Richard North over at EU Referendum has been discussing the importance of the EU in the tax debate – the "elephant in the room", as he puts it. It’s definitely a problem, not only tax but in all areas, that the EU is often quietly left to one side by politicians too ashamed or deceitful to admit that they have in fact signed away vast swathes of Parliamentary power and by people fearful of being tarred as euro-obsessive. Doing so is a dis-service to the issue and most of all to the people of Britain who have to foot the bill for the EU and have to live under its undemocratic rules and regulations.

Richard reckons the British think tank world has dropped the ball on the EU, and there are certainly a lot of targets yet to be shot at. There has, though, been a shift recently with the UK MPs’ expenses story and the accompanying new focus on transparency and accountability naturally leading the eyes of the media on to Brussels, undeniably one of the least transparent and accountable seats of Government in the Western world. The News of the World, for example, has just started a series of investigate reports into the EU Parliament, which is a good step.

The EU is a massively important issue for all sorts of reasons, many of which fall squarely under the remit of the TPA – and it’s something we’ll be taking a close look at very soon, so Richard should watch this space. The elephant had better watch its step…

Last week we blogged on how the EU has not signed off its own accounts for well over a decade and had sacked former accountant Marta Andreasen for saying the EU was rife with “slush funds and fraud”.

On urging our activists to ask their MEP’s why the EU hadn’t signed off their accounts and what they were going to do about it, TPA activist Graeme Pirie got this reply:

“Thank you for your e-mail regarding the EU accounts, to which I also reply on behalf of my two West Midlands Conservative MEP colleagues Philip Bradbourn and Malcolm Harbour.

There are two main problems with the accounts. One is that 80% of the expenditure is actually the responsibility of Member States, both to implement and then report back, and a number of countries are either late and/or inaccurate in their returns – knowing that it is always the Commission that will get the blame.

Another is that there is too much money sloshing around in too many separate budgets in the first place: Conservatives believe that the EU should do less and do it better.

Meanwhile, it is curious that while our own UK Audit Office has not signed off the UK Works and Pensions budget for any single year since Labour came to power, this never seems to hit any headlines. It is however a symptom of exactly the same problem as the EU: too much money in too many pots.

A change of UK Government could help address all these issues

Every good wish

Philip Bushill-Matthews MEP
Conservative – West Midlands Region”

The reply raises some interesting points:  Why hasn’t the DWP budget been signed off by the UK Audit Office for the last ten years?

It’s time we asked them!  Email me and I will send you our Freedom of Information template letter.  Then simply fill in the blanks with your request and ask the DWP when their departmental budget was last signed off by the UK Audit Office.  If it appears Mr. Bushill-Matthews is right and they haven’t been cleared by the Audit Office in the last decade, we can then ask the DWP why they haven’t signed off the accounts for almost as long as the EU. Hopefully then we can expose the flaws in this government’s own accounting as well as keeping up the pressure on the EU. 

Contact: Charles Cushing
Department for Work and Pensions
Adjudication and Constitutional Issues Policy Division
Freedom of Information and Data Protection
2nd Floor, The Adelphi
1 – 11 John Adam Street
London
WC2N 6HT
Tel: 020 7962 8581
Fax: 020 7962 8725
e-mail: freedom-of-information-requ[email protected]

Marta Andreasen, the former chief accountant of the European Union, has lost her claim against the EU for wrongful dismissal.  She was sacked after alleging that EU book-keeping was riddled with “slush funds and fraud” and disclosing that there was a £130million discrepancy between two sets of EU accounts which, incidentally, haven’t been signed off for the past thirteen years. 

This is how accountability seems to work in the EU.  Andreasen has done an excellent service to British taxpayers by making a stand on the dodgy dealings in the EU.  Taxpayers put billions into EU coffers each year and for there to be massive differences – £130million is not small change – in accounts year on year show that the EU needs to be held to account. 

Contact your MEP and demand that the EU sort out its accounts.  It’s our money, tell your MEP to fight for it.

The Bruges Group has published a report exposing how the EU takes £1,000 from every British man, woman and child a year.  UK Independence Party MEP Gerard Batten, who authors the report, unravels the damaging costs the EU is imposing on British business and taxpayers.

This report highlights how over-regulation costs British business £26 billion per annum, how the Common Agricultural Policy costs £15.6 billion and that Britain’s total membership will amount to a whopping £60.1 billion in one single year.

In recent debates on the EU, members from all parties and none have called for a cost-benefit analysis of Britain’s membership of the EU.  The Bruges Group report goes a great distance in informing the debate on the EU and further legitimising the case that we could be better off out the EU if the costs of regulation, bureaucratic meddling and interference continue to spiral.  Clearly, as this report shows, it is a debate worth having to ensure British taxpayers get a fair deal.

The Wall Street Journal reports today yet another example of how continental politicians hope to use  the EU as a means of enforcing their economically disastrous policies across the whole continent.

Each individual EU country knows that their statist schemes will retard economic growth, and send investors, entrepreneurs and capital to freer countries where markets are allowed to flourish and productive elements are welcome. So to avoid "damaging" competition between EU countries, politicians from countries with uncompetitive regulative and tax system want to force all EU countries down to their standard.

This is why certain EU politicians wanted to enforce harmonised taxes across whole EU, so that more competitive countries like Britain would be lumbered with outrageously high tax rates, and thus reducing our relative attractiveness to investors.  This time it is Germany wishing to enforce their strict controls over foreign ownership of German capital. Merkel knows that intervening in the free flow of capital will send investors away from Germany, so she says it is only "fair" and "responsible" to enforce these policies across the EU.

If such intervention made any sort of economic sense then why only restrict ownership of non-EU groups, why not stop French companies from buying German stocks? Indeed, if restricting ownership made any sense at all why not stop companies from one German region buying companies based in another German region.

Economic laws do not follow artificial man-made borders.  It is thus unsurprising that countries most open to foreign investment are those countries that are reaping the biggest gains from globalisation; seeing higher growth, lower unemployment and better allocation of resources. If this undeniable economic logic does not convince Germany, then they are free to continue to shoot themselves in the foot by introducing populist protectionist measures, however, Germany should certainly not be enforcing its stupidity across the whole EU. Germany should not be able to undermine the foundations on which British prosperity is built.

Ultimately, this is just further evidence of how far apart Britain’s economic outlook is from continental Europe’s, and so further evidence of our need to reconsider elements of our relationship with Europe.