CHARLIE McCREEVY ON TAX HARMONIZATION

Ireland’s European Commissioner, Charlie McCreevy, has launched a strong attack on the European Commission’s efforts to introduce a common business tax base across Europe, Sunday Business Post reports.

Establishing the common European business tax base would have serious consequences as larger member states such as France and Germany would be bullying smaller members of the EU such as Ireland or Estonia to harmonize the level of taxation with German or French where productive behavior is heavily punished through excessive tax rates on corporate and individual income. Countries with the most favorable and business-friendly entrepreneurial environment are known after transparent and unburdened business environment. Ireland's 12,5 percent tax rate on corporate income embodies one out of several chapters of success story coined as the "Celtic Tiger". The aims of the EC (European Commission) toward tax harmonization are strongly backed by the majority of EU member states. Probably one of the real reasons behind this policy proposal of the EC is to punish the economies in which growth, entrepreneurship and investment capital creation flourish. Larger member states obviously dislike its smaller counterparts because tax burden (% of the GDP) is very high and due to fiscal pressure, tax rates on productive behavior (work, saving, investment) are very high as well.

By promoting tax harmonization, the EU largely violates one of its foremost founding principles; the free movement of labor, capital and services. Pushing tax harmonization agressively forward would impact the European economy in a very negative way. Competitiveness would sharply decline and the inward investment would probably be switched to somewhere else. Such proposals on behalf of the EC would largely increase tax burden in several member states known for the lowest tax burden in the region.