Eichel does not rule out two-speed EU on tax

A small group of European Union countries could press ahead with corporate tax harmonisation if an EU-wide initiative does not win support, German Finance Minister Hans Eichel told Reuters in an interview on Sunday.
Eichel said it was possible eight or more of the EU's 25 countries could harmonise the way companies calculate their tax liability and hoped some of the 10 countries that joined the EU in May would join any group that decided to go it alone.
Eichel's remarks were the latest salvo in a battle over corporate tax harmonisation that is expected to intensify ahead of a meeting of EU finance ministers in the Netherlands in September when the issue is on the agenda.
German Chancellor Gerhard Schroeder first raised the possibility of a two-speed Europe on tax policy in April on the eve of the bloc's historic expansion.
He suggested the bloc use a procedure known as enhanced co-operation to get around Britain's long-standing opposition to tax harmonisation. The procedure has never been used since being written into the bloc's treaty in 1997.
"If enhanced co-operation proves a more practical alternative (than an EU-wide initiative) then I would also support such an approach," Eichel said.
"It would also be good if this did not consist only of co-operation among members of the old 15-nation EU, but if it also included countries who have just joined," Eichel said.
Germany and France angered many of the new EU member states in May by calling on the European Commission to propose a minimum corporate tax rate as well as harmonising the way companies calculate their tax bills, their so-called tax base.
Most of the newcomers have corporate tax rates that lie well below the 35 to 39 percent standard in France and Germany.
But Eichel said low tax rates did not necessarily mean a lower tax burden if the tax base was sufficiently broad and the impact could be larger in established EU states, hinting it could pave the way for Germany to lower rates.
"For Germany it means broadening the tax base, that is closing loopholes," Eichel said.
Germany could not cut taxes at the moment while its budget deficit was in breach of EU rules, Eichel said. "But a tax system that closes loopholes to achieve the same revenues with lower tax rates - that is a very sensible goal," he added.