Primarolo group under fire

The continued existence of a secretive group of ministers and officials working on taxation issues for the Council of Ministers is being called into question by some member states.

Critics are asking whether the group, which was set up to investigate allegedly harmful tax practices, should be given additional supervisory responsibilities that would bolster its role in community taxation policy.

The group, known as the Primarolo group after chairwoman Dawn Primarolo, a junior UK finance minister, was set up in 1996 to draw up the EU code of conduct, a principle-based voluntary agreement among member states aimed at eradicating harmful tax practices. At the time, there was a fierce debate on corporate tax competition running in parallel to discussion of proposals to tax income from cross-border savings.

According to a Belgian diplomat, the debate over whether the group should be given added responsibilities began last year. "Do we have to add new tasks to keep it alive?" she asked. "We no longer have a specific need for this group. When a group finishes its work, there is no need to maintain it otherwise there is a duplication [of tasks]." According to the diplomat, the Netherlands has also expressed doubts about the group’s role.

A Finnish official confirmed that two countries were "against" the group’s survival. "They say the group was founded … when there were 15 member states. Now there are 27, they say we don’t get anything from the group." At a meeting among member state representatives on Tuesday (13 February), it was agreed that proposals for extending the group’s role will be presented to national finance ministers in June.

The UK denied the significance of the debate. "Two groups expressed [the] view today [13 February] that the group was not serving … important purposes," said a diplomat. "Yes there was a discussion today, as lots of working groups have from time to time, but there is no intention to disband. As far as we’re concerned the group is not under threat."

But the group has previously been the subject of considerable controversy. Critics question the legitimacy of the group, which tends to meet in secrecy. In 1999, two Conservative members of the UK parliament involved in a debate on harmful tax competition hit out at what one termed an "insult to democracy".

To some the group operates as a political mechanism of threats, sanctions and rewards. It has been alleged in the past that member states are rewarded for ‘good behaviour’ at the code of conduct table with leniency from European Commission regulators monitoring state aid.

"Such a group is… about peer pressure. Some find that useful," said a Commission official. "The UK is the most sensitive on this [taxation]. They could have been the first to stop the group. But, apparently because they chair the group, they want to continue."

The continued existence of a secretive group of ministers and officials working on taxation issues for the Council of Ministers is being called into question by some member states.