Reynders told not to talk up EU-wide tax

Date: 05/07/01

By Laurence Frost

BELGIUM'S Didier Reynders has been warned against pushing plans for an EU-wide tax at next week's meeting of finance ministers.

Officials from several member states have indicated Reynders will be 'ambushed' if he dwells on the issue at Tuesday's (10 July) Ecofin meeting, the first under his country's EU presidency.

The idea of using a new tax to fund the Community, instead of the current system of government contributions, has been touted by Belgium as a priority. Prime Minister Guy Verhofstadt was applauded when he alluded to it again in a speech at the European Parliament yesterday (4 July).

Although the plan is not on the formal agenda for Ecofin, several member states fear Reynders will try to use the presentation of the presidency programme to push for concrete advances during his chairmanship.

But Union government officials hint ministers will be briefed to give him a cool reception. "We're reasonably confident people will drop things on him from a great height," said one diplomat.

Even German finance chief Hans Eichel, who has spoken out in favour of the idea, is unlikely to respond positively. Germany wants an EU tax to replace government contributions, but only after the end of the current budgetary period in 2006. "This is not something Eichel expects to see in the next six months," said a German official. "Reynders might try but I don't think he will get any clear-cut orientation."

The European Commission has called for an EU-level tax to fund Community institutions and policies as the 15-nation bloc prepares for the eastward expansion of its membership. But many politicians are cautious about any new taxation proposals, which they know are likely to raise controversy.

They will also be on their guard when Internal Market Commissioner Frits Bolkestein presents his communication on future tax strategy at Tuesday's meeting.

The paper, prepared in the wake of last year's failure at the Nice summit to agree on harmonisation of key taxes, sidelines such efforts in favour of a drive for closer coordination' of levies on pensions and corporate transactions, as well as indirect ones such as value-added tax.

It also signals that the Commission will step up legal action against national tax regimes that infringe EU internal market, competition or freedom of movement rules - a threat some diplomats say could be used to 'persuade' governments to back new coordination measures.

Belgium's Didier Reynders has been warned against pushing plans for an EU-wide tax at the finance ministers' meeting on 10.7.01.