Backed by counterparts from Sweden, Ireland and the Netherlands, the chancellor rejected calls from Belgian finance minister Didier Reynders, current chairman of the council, for a new duty to payable to the European Union.
Brown said Brussels should concentrate on economic reforms and not seek either to impose an ‘extra’ levy on citizens to cover the EU’s annual Pounds 60bn running costs, or push for tax harmonisation.
The chancellor said: ‘The best possible message we can send out is that we will step up the momentum of structural economic reform in product, capital and labour markets. And that will be our first priority – not tax harmonisation.
A euro-tax, Brown said would ‘send out a message that we are not giving the priority we need to long-term reform, when the public the priorities are more growth, more prosperity and more jobs, which means concentrating on economic reform’.
Brown’s comments followed a meeting on Monday night of the 12-nation euro group which agreed to reforms of tax and benefit systems aimed at improving incentives for lower-paid workers by reducing the tax burden.
The proposal for a direct tax paid to Brussels to finance the EU was put forward by the Belgian finance minister Didier Reynders, current chairman of the Ecofin council, with the backing of Luxembourg and the European Commission.
He insisted that the proposal was not an ‘extra tax’ but would replace the current complex system of raising cash from the 15 member states to run the EU with a once-a-year direct tax, possibly from national VAT receipts.
But few others backed the move. Dutch finance minister Gerrit Zalm pointed out that taxation triggered the 80 years war in the Low Countries and Ireland’s Charlie McCreevy said that a stamp duty had sparked the American War of Independence.
Brown pointed out that a British poll tax – in the 14th century – led to the chancellor of the Exchequer being beheaded.
There was more support for the Commission’s plans to harmonise some indirect tax to help the smooth running of the EU single market in goods and services. This would include narrowing the gap between national VAT rates on petrol, tobacco and alcohol.
A commission paper, written by Frits Bolkestein, in charge of the EU single market, which targets making the EU the world’s most competitive economy by 2010 says: ‘Increased tax co-ordination would help member states to meet these objectives. But while a large measure of harmonisation is necessary in the VAT and excise fields, in other tax fields tax co-ordination does not imply tax harmonisation: a reasonable degree of tax competition within the EU is healthy and should be permitted.’
But in response to this, Brown said: ‘Tax harmonisation is not necessary for the single market to work or for the single currency to work.’
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