By Bruno Waterfield - 12th September 2004
The UK, Ireland, and new EU members in Eastern and Central Europe will "never accept" Franco-German moves to set minimum rates of corporation tax.
The Dutch EU presidency said on Saturday that there was a "wide divergence of views" on calls to harmonise taxes on business across Europe's 25 countries.
Paris and Berlin fear that the EU's ten new governments are using low corporation tax rates to lure business into Eastern and Central Europe.
France has floated proposals linking EU funding aimed at poorer European regions - mainly in Eastern and Central Europe - to "tax dumping".
French finance minister Nicolas Sarkozy has called on the EU to cut aid, "new countries whose tax rates are lower than the EU average are no longer eligible to receive structural funds".
But his proposal has fallen on deaf ears. "I see no chance for that to be realised," said Austrian Finance Minister Karl-Heinz Grasser.
Sarkozy is playing down opposition to the Franco-German push to set a European corporate tax threshold."We're at the beginning and like every problem it's hard to find a consensus in Europe," he said.
Britain is also opposing Brussels plans to use an EU-wide method allowing business to calculate corporation tax by the same rules in all 25 European countries.
The issue has been linked to calls for a corporation tax minimum by Germany. "I'm very much in favour of a common tax base... It's nonsense to have a debate about harmonisation of tax rates while we do not have a common tax base," said the country's finance minister Hans Eichel.
UK finance minister Gordon Brown dismisses the plan as a distraction from EU labour market reforms to boost competitiveness and economic growth.
"There is no need for it and it is certainly not a priority.Economic reform is a priority," he said.
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