Tax plans make progress against rhetorical odds

Date: 17/12/1998

By Tim Jones

TAX was the success story of the year not only for Euro-pean integrationists, but also for guardians of national sovereignty, if they but knew it.

Away from the ministerial meeting rooms and the television cameras, diplomats were making real headway in negotiating common systems for taxing interest income, energy consumption and company profits.

In the spring, a high-level committee led by UK treasury minister Dawn Primarolo was set up to enforce a new code of conduct in corporate tax regimes. Tasked with identifying predatory tax schemes, the group found more than 80 sectoral regimes and went through them one by one.

Competition Commissioner Karel van Miert also published guidelines on fiscal state aid, which aimed to close every loophole for governments as they sought to protect domestic companies through discriminatory tax treatment, or attract neighbouring countries' firms with predatory low-tax projects.

Just before the institutions' summer break, the European Commission decided to kick-start stalled talks on energy taxation by making a radical offer which brokered the six-year logjam over the issue. Tax Commissioner Mario Monti's plan to extend minimum rates of excise duty on mineral oils to coal, natural gas and electricity was watered down. Member states would be allowed to impose zero rates on these products as long as they agreed to a 'framework directive'.

With the advent of the Austrian presidency in July, the pace quickened. Vienna decided to put the three tax plans into a single package.

It was starting to work until German Finance Minister Oskar Lafontaine played into the hands of the British tabloids and frightened the UK government. It will now be more difficult for London to sign up to a three-part deal on schedule in December next year.

Feature forms part of the European Voice 'Review of the Year'.