13-14 July Taxation conference

Date: 16/07/1998

MORE than 300 tax experts from all EU member states met in Vienna to discuss tax competition and coordination of tax policy. The conference was convened by the Austrian presidency of the EU to pool information on key aspects of tax harmonisation before a high-level debate at the informal meeting of finance ministers in Vienna on 25-26 September. Austrian Finance Minister Rudolf Edlinger, who hosted the conference, invited experts from the European Commission, Organisation for Economic Cooperation and Development and International Monetary Fund.

THE meeting began with an introduction by Edlinger, who said he believed his presidency could “breath new life” into the Commission's campaign for more coordination of tax policies. “Over the past 12 years, we have seen the tax burden on labour increase by 7&percent; while that on mobile production factors like capital has fallen by 10&percent;,” said Edlinger. He explained that he wanted to give a push to the Commission's proposal for a system of taxing savings interest across the Union, to introduce a form of energy taxation, and to make progress on establishing a definitive regime for value added tax.

TAXATION Commissioner Mario Monti made a speech on future developments in taxation systems in the European Union, in which he reiterated his view that EU nations could make greater progress if they coordinated rather than harmonised tax policies. He outlined proposals in the pipeline including a suggested 20&percent; minimum withholding tax on savings interest combined with an exchange of information between banks and tax authorities, widening the scope of excise duties to coal, electricity and gas, and ending double and zero taxation of pensions. An IMF representative responded.

THE afternoon session was opened by Wolfgang Nolz, director of the Austrian finance ministry tax department. Delegates then discussed the possible effects on European competitiveness if member states harmonised key elements of their fiscal systems. This debate was led by Nolz, a representative of conference co-hosts the Austrian Institute of Economic Research, and an OECD official.

ON THE second day, delegates turned to the question of how to reduce the burden of tax on labour and the harmonisation of VAT. Nobody spoke out against the Commission's analysis that the freeing up of the EU's capital markets had led to competition between governments to cut taxes on capital and raise them on labour. From 1980-94, said the Commission, taxes on labour rose to 40.5&percent; from 34.7&percent; while those on capital fell to 35.2&percent; from 44.1&percent;.

THE conference ended with a debate on the future of corporate taxation, led by Edlinger's deputy, the State Secretary for Finance Wolfgang Ruttenstorfer. It centred on the progress made since member states agreed the EU's code of conduct, designed to wipe out blatant corporate tax breaks. Nolz, a member of the group enforcing the code of conduct, said it planned to prepare a list of tax regimes to be dealt with in time for the scheduled meeting of EU finance ministers in December.