Tax Competition

The arguments raging about tax competition in the EU underscore the two completely different, not to say incompatible views of what the EU is to be. As the discussions develop, it looks like being an interesting time. In the Red corner, the old Europe, wedded to a system of wealth transfer that can no longer be afforded. Championed by France & Germany among others is the idea that the state has a right to your money and that dodging taxes by moving production to the east is somehow immoral. They see the EU as a guarantor of “Social Europe”. In the Blue corner, Anglo Saxon attitudes prevail. Taxes should be kept low to promote economic growth. Although nominally in this group, the UK fails miserably to do as it says and the real champions are mostly the newcomers in the east. These countries see the EU as primarily a trade block. Estonia, one of the best examples of truly free market capitalism in Europe is defending itself vigorously from the worst that the reds can throw at it. The Estonian Prime Minister Juhan Parts sharply attacked France yesterday for its ongoing pressure on new EU member states to increase their corporate tax rates. Now he is joined in the battle by none other that Industry Commissioner Guenter Verheugen, who is saying that tax competition in the European Union is useful. First the man in very successful in pushing Turkey’s candidature forward and now this. Monsieur Chirac must be sticking pins into his effigy as you read this.