Tax harmonisation a 'serious threat' - McDowell

France and Germany have agreed to push to harmonise European Union tax policies, despite continued objections from Ireland, Britain and Sweden.

A joint Franco-German paper will be presented to the Convention on the Future of Europe, which is set to produce a new draft EU treaty, proposing moves to harmonise corporate and value added taxes within the EU. Paris and Berlin hope to unveil their joint scheme by Christmas, the Financial Times reported this morning.

Speaking in Germany today, however, the Minister for Justice Mr McDowell said tax harmonisation posed "a very serious threat" to the EU's competitiveness.

"I would go so far as to argue that anyone who cares for the long-term of the EU and its peoples should reject harmonisation of direct taxation as an aim in itself and, consequently, reject proposals, in the context of a reassignment of competences within the European Union.

"It may surprise some but it doesn't surprise me that the real and fundamental interests of the European Union could be fatally undermined by tax harmonisation proposals," he told the European Academy of Law in Trier, Germany.

France and Germany believe that the single European market is being distorted by "unfair tax competition", with some countries, such as Ireland, setting very low corporate tax levels.

Last month efforts to ensure that greater tax harmonisation formed a key part of the next EU treaty were blocked by a coalition including Ireland, Britain and EU applicant states.