Support Grows for Franco-German Tax Plans

Speaking to the EUobserver, Dutch sources confirmed that "the Dutch government agrees with the initiative of France and Germany (to set minimum base rates for corporate tax)". With the Dutch Presidency just one month away, this apparent U-turn will cause delight in Paris and Berlin and dismay in most new member states. But the Dutch spokesman said that they were not in favor of sanctions for countries that break the proposed minimum tax base - said to be 20 percent. The French, Germans and Swedes want to see a minimum base for corporate tax levels in the EU. Currently, many of the new member states have very low levels of corporate tax. Estonia, for example, has a zero percent rate for reinvested earnings. Latvia, Lithuania and Cyprus charge 15 percent and Poland 19 percent, making their economies more attractive for companies wishing to invest there. As against that, France and Germany both have high levels of corporate tax (around 35 and 40 percent respectively) and are worried that investment will therefore flood from their economies into the new member states. But many new member states see their low corporate tax rates as the best way of attracting investment and maintaining their generally high levels of economic growth. (EUobserver.com)