Attempts to put harmonisation of corporate taxation on the EU agenda were yesterday strongly opposed by Italy's Single Market Commissioner, Mr Mario Monti, who warned that they could jeopardise a delicate agreement on tax co-ordination that "is already bearing fruit".
Mr Monti's comments to journalists after the Commission had heard a progress report on tax co-ordination will be welcomed by the Minister for Finance, Mr McCreevy, and the British government only days after Socialist Finance Ministers re-launched the issue.
On Monday the new German Finance Minister, Mr Oscar Lafontaine, insisted that progress on tax harmonisation would be a key priority of the forthcoming German Presidency of the EU.
Mr Monti said that harmonisation was both politically impossible and probably illegal under the treaty. He admitted, however, that once the single currency was up and running successfully the "dynamics" of a decision on the issue might change.
By defending the Irish and British opposition to harmonisation "at this time", Mr Monti has ensured that while the issue may be regularly aired by the Socialists, it is a complete non-runner. Both States have a veto, and for a decision to be taken a formal proposal from the Commission would also be necessary but certainly not forthcoming.
In its report on the implementation of last December's tax package the Commission argues that the voluntary code of conduct on harmful company tax competition agreed then "has already had an effect on fiscal policies".
The code, which attempts to create a level tax playing field within member states, has led to the withdrawal or gradual abolition of a number of measures, the report says, without specifying any of the 80 different specific regimes which apply around the EU. A detailed survey of the regimes is expected to be published in the preliminary report of a specialist working group next week, but diplomatic sources say they do not expect significant criticism of the Irish deal agreed in July with the Commission for a transition to a standard rate of 12.5 per cent.
