Speaking on BBC television, the chancellor called Portillo’s claims a ‘complete lie and a Tory tax smear’. He said Labour had no plans of heading in the direction of tax harmonisation, but were actually in favour of ‘tax competition across Europe’.
Earlier, Portillo and Tory leader William Hague claimed proposals to harmonise income tax and VAT across Europe were currently under discussion at a European Commission meeting in Brussels today.
Quoting a leaked document, Portillo claimed the European Commission made the following comment: ‘As far as taxes on personal incomes are concerned, it may be necessary to co-ordinate national tax systems.’
The shadow chancellor said such proposals threatened zero VAT ratings on foods, children’s clothes, books, newspapers and public transport.
He further alleged that the Code of Conduct Group, chaired by paymaster general Dawn Primarolo, would be asked to investigate whether different income tax regimes around the EU amounted to so-called ‘harmful’ tax competition.
This was vehemently denied by the chancellor, who said the group Primarolo chaired, was set up to look at unfair competition in corporate taxation, and had ‘no remit on consumer goods’.
Brown’s comments were backed up by EU Commissioner Fritz Bolkestein who said there was no need for an ‘across board harmonisation’.
He added: ‘Major parts of the tax systems should be determined by national preferences and as far as I am concerned it will remain this way for the foreseeable future.’
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