November 10, 2002

Giscard says tax harmonisation on EU agenda

By Daniel Dombey and George Parker

Valéry Giscard d'Estaing expects tax harmonisation to appear in the draft constitution being drawn up by the convention on the future of Europe.

Mr Giscard d'Estaing, who heads the convention, also warned that countries failing to ratify the draft constitution could end up outside the European Union.

The former French president identified a growing consensus within the convention for scrapping the national veto on fiscal issues that could distort the EU's internal market.

The proposal will be strongly opposed by Britain and Ireland. Both countries have insisted they will not abandon their veto on tax matters.

The idea, which is endorsed by a majority of a convention working group on the economy, would allow the EU to set minimum levels of corporate tax and ensure that value added tax did not diverge greatly from one country to the next.

However, it would not affect the right of each member state to levy taxes on personal income, wealth or property.

"There's a strong current in the convention in favour of making certain fiscal questions settled by qualified majority voting," Mr Giscard d'Estaing said.

"There's acceptance of a certain harmonisation. I believe that we will propose a solution to move to a system for taxes that are definitely connected with the market."

Mr Giscard d'Estaing also set out his strong views on what should happen to those countries that fail to ratify the proposed new EU constitution. Speaking to the Kangaroo group, a body that favours more economic integration in Europe, he said non-ratifiers would exclude themselves from the EU, but could have economic ties to the union.

"The probability is that of 25 or 27 member states [after EU enlargement] 23 would accept [the constitution] and two or three will refuse," he said. "We have to abrogate the [EU] treaties that exist. If a country says that it does not like the new treaty, there's no existing structure for them to cling to, they cannot seek refuge in the old agreement.

"We should say: you can maintain an economic role, but you can no longer be in this political system. That will be the consequence of refusal."

He said that such countries would play a similar role to members of the European Free Trade Association, which have a free-trade area with the EU, and cited the micro-state of Liechtenstein, with a population of 30,000, as an example.

Mr Giscard d'Estaing's convention is expected to produce its final draft constitution next summer. It will form the basis of a new EU treaty. which has to be negotiated by all member states, and could be signed in late 2003 or early 2004.

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