Single currency may promote tax union

European fiscal affairs commissioner Mario Monti has said he expects the arrival of the European Union’s single currency to encourage cooperation between member states on tax issues.

Monti was speaking last week at a news conference on a commission report on the results of talks between senior national finance minister officials, and which is due to be discussed at the EU summit in December.

‘When you bring in the single currency there will be a greater demand for coordination. In member states people will get more used to coordinating on economic policy and there will be less resistance to some kind of coordination in the tax area,’ he said. Recent years have seen an increase in labour taxes as member states try to compete with lower taxes on capital and this is counterproductive for cutting employment, he added.

Taxes on labour have risen to 40.5% in 1994, from 34.7% in 1980, while taxes on other production factors have fallen to 35.2%, from 44.1%, the commission said.

The commission is planning shortly to set out guidelines on the use of environmental taxes and propose before the end of the year new plans for tax on energy products, it said.

One specific measure due next year is a proposal to prevent double taxation on royalties paid between companies within a group located in different member states, Monti said.

Commission tax proposals require unanimity and Monti said 30 commission proposals have been withdrawn because of lack of proposals, but gave no timescale for this.