Estonians bite back in ongoing tax debate

  • 2004-10-06
  • Staff and wire reports
TALLINN - Estonia's prime minister and foreign minister sniped back at France last week for its exerting pressure on new EU member states to increase corporate taxes.

The EU Observer reported that Prime Minister Juhan Parts, speaking before an audience at the College of Europe in Warsaw on Sept. 29, rebuked French Finance Minister Nicolas Sarkozy, characterizing the latter's comments as "not pursuant to European values" and "very bad."

Parts went on to say that the debate on harmonization of tax levels, using a EU-wide minimum level, was "demagogic."

Sarkozy has said that new EU countries with low tax rates such as Estonia should lose their EU regional funding.

The Estonian prime minister challenged fears that companies may shift their investments from the old to the new member states. "Companies are always looking for the best opportunities. I would say that it is better that they stay in the EU than move to Asia," he stated.

Parts added that it was wrong to believe that new member states were too poor to afford low tax rates. "Business-friendly tax rates produce more growth and thus more revenues for the public sector," he said.

According to Parts, harmonization of tax levels in the EU would even undermine national democracy. "If national governments cannot even decide over taxes anymore, citizens will start to question what is the point of going to vote in elections," he said, adding that Europe needed more competition and less state intervention.

Foreign Minister Kristiina Ojuland, meanwhile, said that criticism leveled at Estonia's liberal economic policy and low taxes reflected the critics' own problems.

Speaking to Finnish journalists in Tallinn on Sept. 29, she said that Sarkozy's reproaches were only a reflection of France's own economic policy troubles.

"The criticism brings to mind Moscow's reproaches over Estonia's human rights track record. If a country itself has problems with human rights it seeks to evade them by directing attention to other matters," the Finnish agency STT quoted Ojuland as saying.

The European Union must look after its competitiveness and create an enterprise-friendly environment for capital not to move out of the bloc, she added.

"Competition of member states strengthens the whole EU," Ojuland said.

Over recent months the issue of tax harmonization in the 25-member union has crystalized into one of the defining debates on the rights of small states and the struggle of larger ones to concentrate more control in Brussels-based EU institutions.