Predatory tax study near to completion

Date: 11/02/1999

By Tim Jones

TOP treasury officials tasked with eliminating predatory corporate tax practices in the EU are close to completing work on the most controversial elements of their reform package.

When it meets for a jumbo two-day session in Brussels next Tuesday (16 February), the group established to enforce the Union's code of conduct against 'harmful tax competition' will finish its discussions on tax breaks for multinationals' internal management, banking and offshore services.

Diplomats say the group, chaired by UK Treasury Minister Dawn Primarolo, has identified 30 special tax regimes in every member state except Germany, Denmark and Austria as "potentially harmful".

From mid-February onwards, the body will turn its attention to analysing more than 40 other tax schemes designed to aid certain industrial sectors and regions.

The Primarolo team has been asked to present an interim report on its work to EU finance ministers in May and a final summary in November. These will be crucial to the German and Finnish presidencies' chances of persuading reluctant governments to sign up to planned EU-wide taxes on capital income and energy consumption.

Luxembourg Premier Jean-Claude Juncker, who faces elections in June, is opposed to the introduction of a savings tax unless action is also taken against predatory company tax regimes.

Once the work on intra-group services and banking is completed, the body will turn its attention to 15 sectoral regimes including those for shipping, aviation and film production, 17 regional incentives such as the scheme at Shannon Airport in Ireland and low-rate investment premia in east German states, and 23 miscellaneous regimes covering company start-ups and dependent territories.

Next month, Primarolo and her newly-appointed vice-presidents - Barbara Hendricks, the German parliamentary state secretary for tax policy, and Lasse Arvela, director-general for tax at the Finnish finance ministry - will begin in-depth inquiries into all the regimes.

The group will assess the impact of the measures, judging whether the tax rates they offer are lower than the general rate on offer for activities in the rest of the member state and across the EU.