EU tax trade threat

Professional bodies have warned that European Union tax harmonisation measures could mean changes for the UK’s tax system and substantial damage to UK business.

The warnings came as chancellor Gordon Brown was due to meet EU finance ministers to pass measures which could abolish 85 low business tax schemes throughout Europe, including ten in the UK.

But Brown was expected to repeat his determination to use the UK’s veto to block any measures affecting the country’s vital national interests.

Senior technical officer at ACCA, Chas Roy-Chowdhury, said: ‘Tax harmonisation will mean harmonising upwards.’ He warned it could harm businesses and lead to the migration of savings out of the EU.

Some EU members, he observed, had smaller savings markets than the UK and would therefore be less affected by harmonisation.

The issue was also raised by former foreign secretary Lord Hurd, who spoke on the euro at an ACCA Ireland lunch in Dublin last Friday.

Foreshadowing a rash of tax scare stories in the British press, he said: ‘The whole issue of tax harmonisation is coming to the fore in British politics. In many ways, it presents more tangled problems than the euro.’

He referred to the danger tax harmonisation presented to Ireland’s low tax schemes, such as the Irish Financial Services Centre at Dublin docks.

The Institute of Directors also hit out at tax harmonisation this week.

It said: ‘Harmonisation will be upwards to the higher tax rates. Full harmonisation would increase UK taxes by at least #75bn.

‘Businesses faced with increased European tax rates would simply relocate outside Europe. We would lose jobs, income and the tax revenues to pay for public services.’

Francesca Lagerberg, senior technical manager at the English ICA’s tax faculty, said: ‘The impact of tax harmonisation will be enormous because there are so many differences between UK tax laws and those of other European countries.’