Following the virtual statement of intent by the German Finance Minister Oskar Lafontaine that under German presidency there would be a determined effort to move forward minimum corporation tax rates and minimum tax on savings income/dividends, the EU commissioner responsible for taxation, Mario Monti, has sought to take some heat out of the potential conflict between various EU countries, notably Britain and Germany. The following exchange of words springs to mind, “I said not to mention harmonisation! I did but I think I got away with it”.
Mr Monti has stated that any such initiative would be premature and that a more appropriate initiative would be one aimed at tackling harmful competition in business taxes among member states.
Mr Monti recognises that securing political support for harmonisation of the tax bases in EU member states would be a pre-requisite to any minimum business tax and that this would be a difficult objective.
He restated that his objective was not to harmonise taxes across the board but to co-ordinate aspects of national tax to remove harmful distortions. One obvious area is that of special tax incentives to particular industries that could be seen to be discriminatory.
Despite these comforting words, it is still clear that the “Monti” proposal for a 20% withholding tax on savings is still very much a live issue and one which would have some considerable impact on the range of offshore products offered from EU “havens” into the UK.